Edgar Filing: Star Bulk Carriers Corp.

d1460935_20-f.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

[_]	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or 12 (g) OF THE SECURITIES EXCHANGE ACT OF 1934

	OR

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended December 31, 2013

	OR

[_]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _____________ to

	OR

[_]	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	Date of event requiring this shell company report

	Commission file number 001-33869

	STAR BULK CARRIERS CORP.
	(Exact name of Registrant as specified in its charter)

	(Translation of Registrant's name into English)

	Republic of the Marshall Islands
	(Jurisdiction of incorporation or organization)

	c/o Star Bulk Management Inc., 40 Agiou Konstantinou Str., Maroussi 15124, Athens, Greece
	(Address of principal executive offices)

	Spyros Capralos, 011 30 210 617 8400, scapralos@starbulk.com, c/o Star Bulk Management Inc., 40 Agiou Konstantinou Str. Maroussi 15124, Athens, Greece
	(Name, telephone, email and/or facsimile number and address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class		Name of exchange on which registered
Common Stock, par value $0.01 per share		Nasdaq Global Select Market

Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: As of December 31, 2013, there were 29,059,671 shares of common stock of the registrant outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

[_] Yes

[X] No

If this report is an annual report or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

[_] Yes

[X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes

[_] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X] Yes

[_] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer [_]

Accelerated filer [ X ]

Non-accelerated filer [_]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

[X] U.S. GAAP

[_] International Financial Reporting Standards as issued by the International Accounting Standards Board

[_] Other

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

[_] Item 17 or [_] Item 18.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[_] Yes

[X] No

FORWARD-LOOKING STATEMENTS

Star Bulk Carriers Corp. and its wholly owned subsidiaries, or the Company, desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. The words "believe," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect" and similar expressions identify forward-looking statements.

The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include; (i) the strength of world economies; (ii) fluctuations in currencies and interest rates; (iii) general market conditions, including fluctuations in charterhire rates and vessel values; (iv) changes in demand in the drybulk shipping industry, including the market for our vessels; (v) changes in the Company's operating expenses, including bunker prices, drydocking and insurance costs; (vi) changes in governmental rules and regulations or actions taken by regulatory authorities; (vii) potential liability from pending or future litigation; (viii) general domestic and international political conditions; (ix) potential disruption of shipping routes due to accidents or political events; (x) the availability of financing and refinancing; (xi) vessel breakdowns and instances of off-hire; and (xii) other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission, or the Commission. The information set forth herein speaks only as of the date hereof, and the Company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date hereof.

(i)

PART I	1

Item 1.	Identity of Directors, Senior Management and Advisers	1
Item 2.	Offer Statistics and Expected Timetable	1
Item 3.	Key Information	1
Item 4.	Information on the Company	37
Item 4A.	Unresolved Staff Comments	67
Item 5.	Operating and Financial Review and Prospects	67
Item 6.	Directors, Senior Management and Employees	103
Item 7.	Major Shareholders and Related Party Transactions	111
Item 8.	Financial Information	118
Item 9.	The Offer and Listing	121
Item 10.	Additional Information	122
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	137
Item 12.	Description of Securities Other than Equity Securities	139

PART II	139

Item 13.	Defaults, Dividend Arrearages and Delinquencies	139
Item 14. .	Material Modifications to the Rights of Security Holders and Use of Proceeds	139
Item 15.	Controls and Procedures	139
Item 16A.	Audit Committee Financial Expert	141
Item 16B.	Code of Ethics	141
Item 16C.	Principal Accountant Fees and Services	141
Item 16D.	Exemptions from the Listing Standards for Audit Committees	142
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	142
Item 16F.	Change in Registrants Certifying Accoutant	142
Item 16G.	Corporate Governance	143
Item 16H.	Mine Safety Disclosure	144

PART III	144

Item 17.	Financial Statements	144
Item 18.	Financial Statements	144
Item 19.	Exhibits	144

(ii)

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not Applicable.

Item 2. Offer Statistics and Expected Timetable

Not Applicable.

Item 3. Key Information

Throughout this report, the "Company," "Star Bulk," "we," "us" and "our" all refer to Star Bulk Carriers Corp. and its wholly owned subsidiaries. We use the term deadweight ton, or dwt, in describing the size of vessels. Dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and supplies that a vessel can carry. We own, operate, have under construction and provide vessel management services to drybulk vessels of seven sizes: Newcastlemax, which are vessels with carrying capacities of between 200,000 dwt and 215,000 dwt, Capesize, which are vessels with carrying capacities of between 100,000 dwt and 185,000 dwt, Post Panamax, which are vessels with carrying capacities of between 85,000 dwt and 100,000 dwt, Kamsarmax, which are vessels with carrying capacities of between 80,000 dwt and 85,000 dwt, Panamax, which are vessels with carrying capacities of between 65,000 and 80,000 dwt, Ultramax, which are vessels with carrying capacities of between 60,000 and 65,000 dwt, and Supramax, which are vessels with carrying capacities of between 45,000 and 60,000 dwt. Unless otherwise indicated, all references to "Dollars" and "$" in this report are to U.S. Dollars.

A.	Selected Consolidated Financial Data

The table below summarizes our recent financial information. We refer you to the notes to our consolidated financial statements for a discussion of the basis on which our consolidated financial statements are presented. The information provided below should be read in conjunction with "Item 5. Operating and Financial Review and Prospects" and the consolidated financial statements, related notes and other financial information included herein.

Following the 15-for-1 reverse stock split effected on October 15, 2012, pursuant to which every fifteen common shares issued and outstanding were converted into one common share, all share and per share amounts disclosed throughout this Annual report, in the table below and in our consolidated financial statements included at the end of this Annual Report have been retroactively updated to reflect this change in capital structure. Please see " Item 4.A History and Development of the Company".

The historical results included below and elsewhere in this document are not necessarily indicative of the future performance of Star Bulk.

3.A.(i) CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands of U.S. Dollars,

except per share and share data)


	2009			2010			2011			2012			2013

Voyage revenues		142,351			121,042			106,912			85,684			68,296
Management fee income		-			-			153			478			1,598
		142,351			121,042			107,065			86,162			69,894

Voyage expenses		15,374			16,839			22,429			19,598			7,549
Vessel operating expenses		30,168			22,349			25,247			27,832			27,087
Drydocking expenses		6,122			6,576			3,096			5,663			3,519
Depreciation		58,298			46,937			50,224			33,045			16,061
Management fees		771			164			54			-			-
Loss / (gain) on derivative instruments, net		2,154			2,083			390			(41	)		(91	)
General and administrative expenses		8,742			15,404			12,455			9,320			9,910
Bad debt expense		-			2,131			3,139			-			-
Vessel impairment loss		75,208			34,947			62,020			303,219			-
Gain on time charter agreement termination		(16,219	)		-			(2,010	)		(6,454	)		-
Loss on time charter agreement termination		11,040			-			-			-			-
Other operational loss		-			-			4,050			1,226			1,125
Other operational gain		-			(26,648	)		(9,260	)		(3,507	)		(3,787	)
Loss on sale of vessel		-			-			-			3,190			87
		191,658			120,782			171,834			393,091			61,460

Operating (loss) / income		(49,307	)		260			(64,769	)		(306,929	)		8,434

Interest and Finance costs		(9,914	)		(5,916	)		(5,227	)		(7,838	)		(6,814	)
Interest and other income		806			525			744			246			230
Loss on debt extinguishment		-			-			(307	)		-			-
Total other expenses, net		(9,108	)		(5,391	)		(4,790	)		(7,592	)		(6,584	)

(Loss) / income before taxes		(58,415	)		(5,131	)		(69,559	)		(314,521	)		1,850

Income taxes		-			-			-			-			-
Net (Loss) / income		(58,415	)		(5,131	)		(69,559	)		(314,521	)		1,850

(Loss) / earnings per share, basic		(14.39	)		(1.25	)		(14.69	)		(58.32	)		0.13
(Loss) / earnings per share, diluted		(14.39	)		(1.25	)		(14.69	)		(58.32	)		0.13

Weighted average number of shares outstanding, basic			4,058,228				4,099,277				4,736,485				5,393,131				14,051,344
Weighted average number of shares outstanding, diluted			4,058,228				4,099,277				4,736,485				5,393,131				14,116,389

3.A.(ii) CONSOLIDATED BALANCE SHEET AND OTHER FINANCIAL DATA

(In thousands of U.S. Dollars,

except per share data)

	2009			2010			2011			2012			2013

Cash and cash equivalents		40,142			12,824			15,072			12,950			44,298

Total assets		760,641			703,250			717,928			354,706			468,088
Current liabilities, including current portion of long term debt		71,092			43,235			52,154			42,450			29,734
Total long term debt, excluding current portion		187,575			171,044			231,466			195,348			172,048
Common stock		40			42			54			54			291
Stockholders' equity		499,257			488,252			434,213			116,746			266,106
Total liabilities and stockholders' equity		760,641			703,250			717,928			354,706			468,088

OTHER FINANCIAL DATA

Dividends declared and paid ($1.50 $3.0 $3.0 $0.68 and $0.0 per share, respectively)		6,185			12,385			14,391			3,631			0
Net cash provided by operating activities		65,877			87,949			50,604			18,999			27,495
Net cash (used in)/ provided by investing activities		(1,430	)		(60,151	)		(122,337	)		25,488			(108,118	)
Net cash (used in) / provided by financing activities		(53,780	)		(55,116	)		73,981			(46,609	)		111,971

FLEET DATA
Average number of vessels (1)		11.97			10.81			12.26			14.19			13.34
Total ownership days for fleet (2)		4,370			3,945			4,475			5,192			4,868
Total available days for fleet (3)		4,240			3,847			4,377			4,879			4,763
Total voyage days for fleet (4)		4,117			3,829			4,336			4,699			4,651
Fleet utilization (5)		97	%		99	%		99	%		96	%		98	%

AVERAGE DAILY RESULTS (In U.S. Dollars)
Time charter equivalent (6)		29,450			26,859			19,989			15,419			14,427
Vessel operating expenses		6,903			5,665			5,642			5,361			5,564
Management fees		176			41			12			-			-
General and administrative expenses		2,000			3,904			2,783			1,795			2,036

(1)	Average number of vessels is the number of vessels that comprised our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in that period.

(2)	Ownership days are the total calendar days each vessel in the fleet was owned by us for the relevant period.

(3)	Available days for the fleet are the ownership days after subtracting for off-hire days as a result of major repairs, dry-docking or special or intermediate surveys.

(4)	Voyage days are the total days the vessels were in our possession for the relevant period after subtracting all off-hire days incurred for any reason (including off-hire for dry-docking, major repairs, special or intermediate surveys or transfer of ownership).

(5)	Fleet utilization is calculated by dividing voyage days by available days for the relevant period.

(6)	Represents the weighted average time charter equivalent, or TCE, of our entire fleet. TCE rate is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE rate is determined by dividing voyage revenues (net of Voyage expenses and amortization of fair value of above/below market acquired time charter agreements) by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, as well as commissions. TCE rate is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods. We included under the heading "Average Daily Results" TCE revenues, a non-GAAP measure, as we believe it provides additional meaningful information in conjunction with voyage revenues, the most directly comparable U.S. GAAP measure, because it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance. Our calculation of TCE may not be comparable to that reported by other companies. For further information concerning our calculation of TCE rate and of reconciliation of TCE rate to voyage revenue, please see "Item 5. Operating and Financial Review and Prospects – A. Operating Results."

Capitalization and Indebtedness

Not Applicable.

Reasons for the Offer and Use of Proceeds

Not Applicable.

Risk factors

The following risks relate principally to the industry in which we operate and our business in general. Other risks relate principally to the securities market and ownership of our common stock. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition operating results or cash available for dividends or the trading price of our common stock.

Because the Public Company Accounting Oversight Board is not currently permitted to inspect our independent accounting firm, you may not benefit from such inspections.

Auditors of U.S. public companies are required by law to undergo periodic Public Company Accounting Oversight Board (PCAOB) inspections that assess their compliance with U.S. law and professional standards in connection with performance of audits of financial statements filed with the Commission. Certain European Union countries, including Greece, do not currently permit the PCAOB to conduct inspections of accounting firms established and operating in such European Union countries, even if they are part of major international firms. Accordingly, unlike for most U.S. public companies, the PCAOB is prevented from evaluating our auditor's performance of audits and its quality control procedures, and, unlike shareholders of most U.S. public companies, we and our shareholders are deprived of the possible benefits of such inspections.

We may be adversely affected by the introduction of new accounting rules for leasing.

International and U.S. accounting standard-setting boards (the International Accounting Standards Board ("IASB") and the Financial Accounting Standards Board ("FASB") have issued new exposure drafts in their joint project that would require lessees to record most leases on their balance sheets as lease assets and liabilities. Entities would still class classify leases, but classification would be based on different criteria and would serve a different purpose than it does today. Lease classification would determine how entities recognize lease-related revenue and expense, as well as what lessor's record on the balance sheet. Classification would be based on the portion of the economic benefits of the underlying asset expected to be consumed by the lessee over the lease term. Financial statement metrics such as leverage and capital ratios, as well as EBITDA, may also be affected, even when cash flow and business activity have not changed. This may in turn affect covenant calculations under various contracts (e.g. loan agreements) unless the affected contracts are modified. The IASB and FASB's redeliberation of certain topics is expected to extend through much of 2014 and an effective date has not yet been determined. Accordingly, the timing and ultimate effect of those proposals of the Company is uncertain.

Industry Specific Risk Factors

Charterhire rates for drybulk vessels are volatile and have declined significantly since their historic highs and may remain at low levels or decrease in the future, which may adversely affect our earnings, revenue and profitability and our ability to comply with our loan covenants.

The drybulk shipping industry is cyclical with high volatility in charterhire rates and profitability. The degree of charterhire rate volatility among different types of drybulk vessels has varied widely; however, the continued downturn in the drybulk charter market has severely affected the entire drybulk shipping industry and charterhire rates for drybulk vessels have declined significantly from historically high levels in 2008. The Baltic Dry Index, or the BDI, a daily average of charter rates for key drybulk routes published by the Baltic Exchange Limited, which has long been viewed as the main benchmark to monitor the movements of the drybulk vessel charter market and the performance of the entire drybulk shipping market, declined 94% in 2008 from a peak of 11,793 in May 2008 to a low of 663 in December 2008 and has remained volatile since then. The BDI recorded a record low of 647 in February 2012. While the BDI has increased from these low levels and has floated between 698 and 2,337 for year ended December 31, 2013, there can be no assurance that the drybulk charter market will continue to increase and the market could decline. We have significant exposure to changes in daily charter rates due to the short-term time charters and voyage charters on which our vessels currently are principally employed.

Fluctuations in charter rates result from changes in the supply of and demand for vessel capacity and changes in the supply of and demand for the major commodities carried by water internationally. Because the factors affecting the supply of and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are also unpredictable. Since a substantial portion of our vessels are or will be employed in the spot market we will be exposed to the cyclicality and volatility of the spot market. We may be unable to keep our vessels fully employed in these short-term markets or charter rates available in the spot market may be insufficient to enable our vessels to be operated profitably. A significant decrease in charter rates would affect asset values and adversely affect our profitability, cash flows and ability to comply with the covenants in our credit facilities.

Factors that influence demand for drybulk vessel capacity include:

·	supply of and demand for energy resources, commodities, consumer and industrial products;

·	changes in the exploration or production of energy resources, commodities, consumer and industrial products;

·	the location of regional and global exploration, production and manufacturing facilities;

·	the location of consuming regions for energy resources, commodities, consumer and industrial products;

·	the globalization of production and manufacturing;

·	global and regional economic and political conditions, including armed conflicts and terrorist activities; embargoes and strikes;

·	developments in international trade;

·	changes in seaborne and other transportation patterns, including the distance cargo is transported by sea;

·	environmental and other regulatory developments;

·	currency exchange rates; and

weather.

Factors that influence the supply of vessel capacity include:

·	the number of newbuilding deliveries;

·	port and canal congestion;

·	the scrapping of older vessels;

·	vessel casualties; and

·	the number of vessels that are out of service, namely those that are laid-up, drydocked, awaiting repairs or otherwise not available for hire.

In addition to the prevailing and anticipated freight rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance and insurance coverage, the efficiency and age profile of the existing drybulk fleet in the market and government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in industry conditions.

We anticipate that the future demand for our drybulk vessels will be dependent upon economic growth in the world's economies, including China and India, seasonal and regional changes in demand, changes in the capacity of the global drybulk carrier fleet and the sources and supply of drybulk cargo to be transported by sea. Given the number of new drybulk carriers currently on order with the shipyards, the capacity of the global drybulk carrier fleet seems likely to increase and there can be no assurance as to the timing or extent of future economic growth. Adverse economic, political, social or other developments could have a material adverse effect on our business and operating results.

An over-supply of drybulk carrier capacity may depress the charter rates and, in turn, adversely affect our profitability.

Fluctuations in charter rates and vessel values result from changes in the supply and demand for drybulk cargoes carried internationally at sea, including coal, iron ore, grains and minerals. The market supply of drybulk carriers has been increasing, as the number of drybulk carriers on order was recently at near historic highs. These newbuildings were delivered in significant numbers starting at the beginning of 2006 and continued to be delivered in significant numbers through 2013. While vessel supply will continue to be affected by the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or accidental losses, an over-supply of drybulk carrier capacity, particularly in conjunction with slowdown in demand for vessel capacity, could exacerbate the decrease in charter rates or prolong the period during which low charter rates prevail. We currently have ten vessels that we consider to be employed in the spot market due to the short duration of their current charter agreements, six of our vessels on medium to long term charters scheduled to expire in June 2014, August 2014, November 2015 and June 2016 and one vessel under its periodic dry-docking survery. If there is a low charter rate environment during a period when the current charters for our drybulk carriers expire or are terminated, we may only be able to recharter those vessels at reduced rates or we may not be able to charter our vessels at all.

Many of our vessels will soon be exposed to the volatilities of the drybulk charter markets.

Drybulk charter markets have experienced significant continued weakness in 2013. We currently have ten vessels that we consider to be employed in the spot market due to the short duration of their current charter agreements six of our vessels on medium to long term time charters scheduled to expire in June 2014, August 2014, November 2015 and June 2016 and one vessel under its periodic dry-docking survey. The time charter market is highly competitive and spot and short-term trip charter market charterhire rates (which affect time charter rates) may fluctuate significantly based upon the supply of, and demand for, seaborne drybulk shipping capacity. Our ability to re-charter our vessels on the expiration or termination of their current time charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, economic conditions in the drybulk shipping market. The drybulk carrier charter market is volatile, and in the past, time charter and spot market charter rates for drybulk carriers have declined below operating costs of vessels. If we are required to charter these vessels at a time when demand and charter rates are very low, we may not be able to secure time charter or spot market employment for our vessels at all or at reduced and potentially unprofitable rates. As a result, our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends, if any, in the future, and compliance with covenants in our credit facilities, may be affected.

If economic conditions throughout the world do not improve, it will have an adverse impact on our operations and financial results.

Negative trends in the global economy that emerged in 2008 continue to adversely affect global economic conditions. In addition, the world economy continues to face a number of challenges, including the economic weakness in the European Union and the United States. The deterioration in the global economy has caused, and may continue to cause, a decrease in worldwide demand for certain goods, and thus, shipping. We cannot predict how long the current conditions will last. However, recent and developing economic and governmental factors, together with the concurrent decline in charter rates and vessel values, have had a material adverse effect on our results of operations, financial condition and cash flows, have caused the price of our common shares to decline and could cause the price of our common shares to decline further.

The economies of the United States, the European Union and other parts of the world continue to experience relatively slow growth or remain in recession and exhibit weak economic trends. The credit markets in the United States and Europe have experienced significant contraction, deleveraging and reduced liquidity, and the U.S. federal government and state governments and European authorities continue to implement a broad variety of governmental action and/or new regulation of the financial markets. While credit conditions are beginning to stabilize, global financial markets have been, and continue to be, disrupted and volatile. Since 2008, lending by financial institutions worldwide remains at low levels compared to the period preceding 2008.

The continued economic slowdown in the Asia Pacific region, especially in Japan and China, may exacerbate the effect on us of the recent slowdown in the rest of the world. Before the global economic financial crisis that began in 2008, China had one of the world's fastest growing economies in terms of gross domestic product, or GDP, which had a significant impact on shipping demand. The growth rate of China's GDP for the year ended December 31, 2013, is estimated to remain around 7.7%, approximately the same growth rate as for the year ended December 31, 2012, remaining below pre-2008 levels. China has imposed measures to restrain lending, which may further contribute to a slowdown in its economic growth. China and other countries in the Asia Pacific region may continue to experience slowed or even negative economic growth in the future. Moreover, the current economic slowdown in the economies of the United States, the European Union and other Asian countries may further adversely affect economic growth in China and elsewhere. Our financial condition and results of operations, as well as our future prospects, would likely be impeded by a continuing or worsening economic downturn in any of these countries.

The market values of our vessels have declined and may further decline, which could limit the amount of funds that we can borrow or trigger certain financial covenants under our current or future credit facilities and/or we may incur a loss if we sell vessels following a decline in their market value.

The fair market values of our vessels have generally experienced high volatility and have declined significantly. The market prices for drybulk carriers have decreased sharply from their historically high levels. The fair market value of our vessels may continue to fluctuate (i.e., increase and decrease) depending on a number of factors including:

·	prevailing level of charter rates;

·	general economic and market conditions affecting the shipping industry;

·	types, sizes and ages of vessels;

·	supply and demand for vessels;

·	other modes of transportation;

·	cost of newbuildings;

·	governmental or other regulations;

·	technological advances; and

·	competition from other shipping companies and other modes of transportation.

In addition, as vessels grow older, they generally decline in value. If the fair market value of our vessels declines further, we may not be in compliance with certain provisions of our term loans and we may not be able to refinance our debt or obtain additional financing. In addition, if we sell one or more of our vessels at a time when vessel prices have fallen, this would result in a loss and a reduction in earnings.

Charter rates and vessel values have been negatively affected mainly by the record high deliveries of newly built vessels during the last few years, which resulted in a significant expansion of the drybulk fleet. Drybulk carrier values have also declined both as a result of a slowdown in the availability of global credit and the significant deterioration in charter rates. There can be no assurance as to how long charter rates and vessel values will remain at their currently low levels. Charter rates may remain at low levels for some time which will adversely affect our revenue and profitability.

In addition, because the market value of our vessels may fluctuate significantly, we may incur losses when we sell vessels, which may adversely affect our earnings. If we sell vessels at a time when vessel prices have fallen and before we have recorded an impairment adjustment to our financial statements, the sale may be at less than the vessel's carrying amount in our financial statements, resulting in a loss and a reduction in earnings. Recently, we have recorded the following impairment charges: Star Alpha during the year ended December 31, 2009, Star Beta during the year ended December 31, 2010, Star Sigma and Star Ypsilon, during the year ended December 31, 2011, our entire Supramax fleet and Star Sigma during the year ended December 31, 2012. During the year ended December 31, 2013, we did not record any impairment charges. See "Critical Accounting Policies – Impairment of Long-lived Assets".

Our earnings may be adversely affected if we do not successfully employ our newbuilding vessels once they are delivered.

We have entered into agreements for the construction of nine newbuilding drybulk carriers and to two bareboat charters for two newbuilding Newcastlemax drybulk carriers on 10-year terms with options to purchase the vessels at any time and we have a purchase obligation upon the completion of the tenth year of the bareboat charterparty. We have not arranged charters for these vessels and given current market conditions, we will seek to deploy our vessels on time and spot charters in a manner that will help us achieve a steady flow of earnings. Although period charters provide relatively steady streams of revenue as well as a portion of the revenues generated by the charterer's deployment of the vessels in the spot market or otherwise, vessels committed to period charters may not be available for spot voyages during an upturn in the drybulk industry cycle, as the case may be, when spot voyages might be more profitable. If we cannot employ our vessels on profitable time charters or trade them in the spot market profitably, our results of operations and operating cash flow may suffer if rates achieved are not sufficient to cover respective vessel operating and financial expenses.

Newbuilding projects are subject to risks that could cause delays, cost overruns or cancellation of our newbuilding contracts.

We have entered into contracts to purchase nine newbuilding drybulk carriers to be built at Shanghai Waigaoqiao Shipbuilding Co., or SWS, Japan Marine United Corporation, or JMU, and Nantong COSCO KHI Ship Engineering Co., or NACKS, in China and Japan for an aggregate amount of $367.4 million. We have also entered two bareboat charters with CSSC (Hong Kong) Shipping Company Limited, or CSSC, for two newbuilding Newcastlemax drybulk carriers on 10-year terms with options to purchase the vessels at any time, and we have a purchase obligation upon the completion of the tenth year of the bareboat charterparty. All eleven vessels are scheduled to be delivered to us throughout 2015 and 2016. Newbuilding construction projects are subject to risks of delay or cost overruns due to a number of factors. Significant cost overruns or delays could adversely affect our financial position, results of operations and cash flows. Additionally, failure to complete the project on time will delay revenue generating operations for the vessels.

In addition, in the event the shipyard does not perform under their contracts and in the unlikely event that there can be no enforcement of the refund guarantees against the third party banks we may lose all or part of our investment, which would have a material adverse effect on our results of operations, financial condition and cash flows.

Also, if vessel values decline, we may choose to terminate the newbuilding contracts we have entered into, which may result in the forfeiture of yard payments we have already made, or we may decide to sell the newbuildings at a loss, in which case we may be required to make additional yard payments. Either of these scenarios would affect our result of operations and financial condition.

If we are unable to obtain financing required to complete payments on our newbuildings, we may lose all or a portion of the payments previously made.

As of March 20, 2014, we have paid aggregate installments of $66.8 million to acquire the nine newbuilding drybulk carriers from SWS, JMU and NACKS in China and Japan. Until delivery of the vessels we will have remaining installment obligations in the amount of $300.6 million before we take possession of the vessels. In connection with the two bareboat charters for two newbuilding Newcastlemax drybulk carriers, as of March 20, 2014, we have paid an amount of $11.55 million, representing the first installment of upfront hire and the second equal installment is due upon the completion of the steel-cutting stage of the construction of each vessel and an amount of $462,000 representing the first installment of handling fees and the second installment is due in one year. In addition we have options to purchase the respective vessels at any time, which are exercisable on a monthly basis against a predetermined, amortizing balance payment, whilst we have a respective obligation at the expiration of the bareboat term. The construction price for the respective vessels is $56.5 million and $59.0 million, respectively. We had, as of March, 20, 2014, a cash balance of $55.7 million to fund these newbuilding purchases and other newbuilding purchases. To fund the remaining portion of our installments and to acquire further vessels, we will be required to use cash or incur borrowings or raise capital through the sale of additional equity securities. Our ability to obtain bank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. If we are not able to borrow additional funds, raise other capital or utilize available cash on hand, we may not be able to acquire this vessel or other newbuilding vessels, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. If for any reason, we fail to make a payment when due, which may result in a default under our newbuilding contract, or otherwise fail to take delivery of our vessel, we would be prevented from realizing potential revenues from this vessel, which could have a material adverse effect on our business, results of operations and financial condition. Additionally, and we could also lose all or a portion of our yard payments that were paid by us and we could be liable for penalties and damages under such contracts. Even if we are successful in obtaining necessary funds, incurring additional debt may significantly increase our interest expense and financial leverage, which could limit our financial flexibility and ability to pursue other business opportunities.

We are subject to certain risks with respect to our counterparties and contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.

We have entered into, and may enter into the future, various contracts, including charter agreements, shipbuilding contracts, acquisition agreements and credit facilities. Such agreements subject us to counterparty risks. The ability of each of our counterparties to perform their obligations under a contract with us, will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime and offshore industries, the overall financial condition of the counterparty, charter rates received for specific types of vessels, and various expenses. For example, the combination of a reduction of cash flow resulting from declines in world trade, a reduction in borrowing bases under reserve-based credit facilities and the lack of availability of debt or equity financing may result in a significant reduction in the ability of charterers to make charter payments to us. In addition, in depressed market conditions, charterers and customers may no longer need a vessel that is then under charter or contract or may be able to obtain a comparable vessel at lower rates. As a result, charterers and customers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our management of third party vessels, including some owned by entities affiliated with certain of our directors, could create competition for commercial opportunities and the potential for conflicts of interest.

We currently provide vessel management services to fourteen drybulk carriers owned by third parties, including eleven vessels owned by entities affiliated with the Oceanbulk Group, which was founded by and is affiliated with our Chairman, Mr. Petros Pappas, and our Director, Mrs. Milena-Maria Pappas. We manage these vessels under the same strategy as our owned vessels. We receive $750 per vessel per day management fees for such management services, and do not share in any revenue or profits from the chartering of such vessels which are received by the third party owners, including the entities affiliated with our directors as noted above.

An over-supply of drybulk carrier capacity may depress the charter rates, which may limit our ability to operate our drybulk carriers profitably.

The supply of drybulk vessels has increased significantly since the beginning of 2006. Although the number of drybulk carriers on order has declined from the historic highs in recent years, there remains a substantial amount of capacity on order. Supply growth has been outpacing vessel demand growth over the past few years causing downward pressure on charter rates. Until the new supply is fully absorbed by the market, charter rates may continue to be under pressure due to vessel supply in the near to medium term.

Acts of piracy on ocean-going vessels could adversely affect our business

Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Indian Ocean and in the Gulf of Aden off the coast of Somalia. Although the frequency of sea piracy worldwide decreased during 2013 to its lowest level since 2009, sea piracy incidents continue to occur, particularly in the Gulf of Aden off the coast of Somalia and increasingly in the Gulf of Guinea, with drybulk vessels and tankers particularly vulnerable to such attacks. If these piracy attacks result in regions in which our vessels are deployed being characterized by insurers as "war risk" zones by insurers or Joint War Committee "war and strikes" listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including costs which may be incurred to the extent we employ onboard security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, detention hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, results of operations, cash flows, financial condition and ability to pay dividends and may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.

The current state of the global financial markets and current economic conditions may adversely impact our ability to obtain financing on acceptable terms and otherwise negatively impact our business.

Global financial markets and economic conditions have been, and continue to be, volatile. Recently, operating businesses in the global economy have faced tightening credit, weakening demand for goods and services, deteriorating international liquidity conditions, and declining markets. There has been a general decline in the willingness by banks and other financial institutions to extend credit, particularly in the shipping industry, due to the historically volatile asset values of vessels. As the shipping industry is highly dependent on the availability of credit to finance and expand operations, it has been negatively affected by this decline.

Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets has increased as many lenders have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at all or on terms similar to current debt and reduced, and in some cases ceased, to provide funding to borrowers. Due to these factors, we cannot be certain that financing will be available if needed and to the extent required, on acceptable terms. If financing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due or we may be unable to enhance our existing business, complete additional vessel acquisitions or otherwise take advantage of business opportunities as they arise.

If the current global economic environment persists or worsens, we may be negatively affected in the following ways:

we may not be able to employ our vessels at charter rates as favorable to us as historical rates or operate our vessels profitably; and

the market value of our vessels could decrease, which may cause us to recognize losses if any of our vessels are sold.

The occurrence of any of the foregoing could have a material adverse effect on our business, results of operations, cash flows and financial condition.

The instability of the euro or the inability of countries to refinance their debts could have a material adverse effect on our revenue, profitability and financial position.

As a result of the credit crisis in Europe, in particular in Greece, Italy, Ireland, Portugal and Spain, the European Commission created the European Financial Stability Facility, or the EFSF, and the European Financial Stability Mechanism, or the EFSM, to provide funding to Eurozone countries in financial difficulties that seek such support. In March 2011, the European Council agreed on the need for Eurozone countries to establish a permanent stability mechanism, the European Stability Mechanism, or the ESM, which was established on September 27, 2012, to assume the role of the EFSF and the EFSM in providing external financial assistance to Eurozone countries. Despite these measures, concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations and the overall stability of the euro. An extended period of adverse development in the outlook for European countries could reduce the overall demand for drybulk cargoes and for our services. These potential developments, or market perceptions concerning these and related issues, could affect our financial position, results of operations and cash flow.

Charter rates are subject to seasonal fluctuations and market volatility, which may adversely affect our financial condition and ability to pay dividends.

Currently six of our vessels are chartered on medium to long-term time charters with an average remaining term of approximately 1.23 years ten of our vessels are considered to be employed in the spot market and one of our vessels underwent its periodic dry-docking survey. Demand for vessel capacity has historically exhibited seasonal variations and, as a result, fluctuations in charter rates. This seasonality may result in quarter-to-quarter volatility in our operating results for vessels trading in the spot market. Seasonality in the sector in which we operate could materially affect our operating results and cash available for dividends.

Rising fuel prices may adversely affect our profits.

Fuel is a significant, if not the largest, expense in our shipping operations when vessels are not under period time charters. Changes in the price of fuel may adversely affect our profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries (OPEC) and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail.

We are subject to international safety regulations and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.

Our business and the operation of our vessels are materially affected by government regulation in the form of international conventions, national, state and local laws and regulations in force in the jurisdictions in which the vessels operate, as well as in the country or countries of their registration. Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with such conventions, laws and regulations or the impact thereof on the resale prices or useful lives of our vessels. Additional conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations. We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates, and financial assurances with respect to our operations.

The operation of our vessels is affected by the requirements set forth in the United Nations' International Maritime Organization's International Management Code for the Safe Operation of Ships and Pollution Prevention, or ISM Code. The ISM Code requires ship owners, ship managers and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The failure of a ship owner or bareboat charterer to comply with the ISM Code may subject it to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports. If we are subject to increased liability for noncompliance or if our insurance coverage is adversely impacted as a result of noncompliance, we may have less cash available for distribution to our stockholders as dividends. If any of our vessels are denied access to, or are detained in, certain ports, this may decrease our revenues.

We operate our vessels worldwide and as a result, our vessels are exposed to international risks which may reduce revenue or increase expenses.

The international shipping industry is an inherently risky business involving global operations. Our vessels and their cargoes are at a risk of being damaged or lost because of events such as mechanical failure, collision, human error, war, terrorism, piracy, marine disasters, and bad weather and other acts of God. In addition, changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These sorts of events could interfere with shipping routes and result in market disruptions which may reduce our revenue or increase our expenses.

Our vessels may call on ports located in countries that are subject to restrictions imposed by the U.S. or other governments, which could adversely affect our reputation and the market for our common shares.

From time to time on charterers' instructions, our vessels may call on ports located in countries subject to sanctions and embargoes imposed by the United States government and countries identified by the U.S. government as state sponsors of terrorism, such as Cuba, Iran, Sudan and Syria, and since our inception, to the best of our knowledge only one of our vessels made one port call in Iran in 2011. The U.S. sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. With effect from July 1, 2010, the U.S. enacted the Comprehensive Iran Sanctions Accountability and Divestment Act, or CISADA, which expanded the scope of the Iran Sanctions Act. Among other things, CISADA expands the application of the prohibitions to companies, such as ours, and introduces limits on the ability of companies and persons to do business or trade with Iran when such activities relate to the investment, supply or export of refined petroleum or petroleum products. In addition, on May 1, 2012, President Obama signed Executive Order 13608 which prohibits foreign persons from violating or attempting to violate, or causing a violation of any sanctions in effect against Iran or facilitating any deceptive transactions for or on behalf of any person subject to U.S. sanctions. Any persons found to be in violation of Executive Order 13608 will be deemed a foreign sanctions evader and will be banned from all contacts with the United States, including conducting business in U.S. dollars. Also in 2012, President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012, or the Iran Threat Reduction Act, which created new sanctions and strengthened existing sanctions. Among other things, the Iran Threat Reduction Act intensifies existing sanctions regarding the provision of goods, services, infrastructure or technology to Iran's petroleum or petrochemical sector. The Iran Threat Reduction Act also includes a provision requiring the President of the United States to impose five or more sanctions from Section 6(a) of the Iran Sanctions Act, as amended, on a person the President determines is a controlling beneficial owner of, or otherwise owns, operates, or controls or insures a vessel that was used to transport crude oil from Iran to another country and (1) if the person is a controlling beneficial owner of the vessel, the person had actual knowledge the vessel was so used or (2) if the person otherwise owns, operates, or controls, or insures the vessel, the person knew or should have known the vessel was so used. Such a person could be subject to a variety of sanctions, including exclusion from U.S. capital markets, exclusion from financial transactions subject to U.S. jurisdiction, and exclusion of that person's vessels from U.S. ports for up to two years.

On November 24, 2013, the P5+1 (the United States, United Kingdom, Germany, France, Russia and China) entered into an interim agreement with Iran entitled the "Joint Plan of Action" ("JPOA"). Under the JPOA it was agreed that, in exchange for Iran taking certain voluntary measures to ensure that its nuclear program is used only for peaceful purposes, the U.S. and EU would voluntarily suspend certain sanctions for a period of six months.

On January 20, 2014, the U.S. and E.U. indicated that they would begin implementing the temporary relief measures provided for under the JPOA. These measures include, among other things, the suspension of certain sanctions on the Iranian petrochemicals, precious metals, and automotive industries from January 20, 2014 until July 20, 2014.

Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future as such regulations and U.S. Sanctions may be amended over time, and the U.S. retains the authority to revoke the aforementioned relief if Iran fails to meet its commitments under the JPOA. Any such violation could result in fines, penalties or other sanctions that could severely impact our ability to access U.S. capital markets and conduct our business, and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our common stock may adversely affect the price at which our common stock trades. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. In addition, our reputation and the market for our securities may be adversely affected if we engage in certain other activities, such as entering into charters with individuals or entities in countries subject to U.S. sanctions and embargo laws that are not controlled by the governments of those countries, or engaging in operations associated with those countries pursuant to contracts with third parties that are unrelated to those countries or entities controlled by their governments. Investor perception of the value of our common stock may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.

World events could affect our results of operations and financial condition.

Continuing conflicts and recent developments in the Middle East, including Egypt, and North Africa, including Libya, and the presence of the United States and other armed forces in Afghanistan, may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also adversely affect our ability to obtain financing on terms acceptable to us or at all. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia. Any of these occurrences, or the perception that our vessels are potential terrorist targets, could have a material adverse impact on our business, financial condition, results of operations and ability to pay dividends.

Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.

International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination. Inspection procedures may result in the seizure of contents of our vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines or other penalties against us.

It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, financial condition and results of operations.

Maritime claimants could arrest one or more of our vessels, which could interrupt our cash flow.

Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a claimant may seek to obtain security for its claim by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flow and require us to pay large sums of money to have the arrest or attachment lifted. In addition, in some jurisdictions, such as South Africa, under the "sister ship" theory of liability, a claimant may arrest both the vessel which is subject to the claimant's maritime lien and any "associated" vessel, which is any vessel owned or controlled by the same owner. Claimants could attempt to assert "sister ship" liability against a vessel in our fleet for claims relating to another of our vessels.

Governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings.

A government could requisition one or more of our vessels for title or for hire. Requisition for title occurs when a government takes control of a vessel and becomes its owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes its charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Although we would be entitled to compensation in the event of a requisition of one or more of our vessels, the amount and timing of payment would be uncertain. Government requisition of one or more of our vessels may negatively impact our revenues and reduce the amount of cash we have available for distribution as dividends to our stockholders.

Company Specific Risk Factors

Substantial debt levels could limit our flexibility to obtain additional financing or pursue other business opportunities.

As of March 20, 2014, we had outstanding indebtedness of $259.9 million and we expect to incur additional indebtedness as we continue to grow our fleet. This level of debt could have important consequences to us, including the following:

·	we may not be able to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes or such financing may be unavailable on favorable terms;

·	we may need to use a substantial portion of our cash from operations to make principal and interest payments on our debt, reducing the funds that would otherwise be available for operations, future business opportunities and dividends to our shareholders;

·	our debt level could make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally; and

·	our debt level may limit our flexibility in responding to changing business and economic conditions.

Our ability to service our debt will depend upon, among other things, our financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating income is not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We may not be able to effect any of these remedies on satisfactory terms, or at all. In addition, a lack of liquidity in the debt and equity markets could hinder our ability to refinance our debt or obtain additional financing on favorable terms in the future. In addition, our loan agreements may impose operation restrictions on us such as changing the management of our vessels. Please see "Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Senior Secured Credit Facilities."

We may be unable to comply with the covenants contained in our loan agreements, which would affect our ability to conduct our business.

Our loan agreements for our borrowings, which are secured by mortgages on our vessels, contain various financial and other covenants. Among those covenants are requirements that relate to our financial position, operating performance and liquidity.

The market value of drybulk vessels is sensitive, among other things, to changes in the drybulk charter market, with vessel values deteriorating in times when drybulk charter rates are falling and improving when charter rates are anticipated to rise. The current low charter rates in the drybulk market, along with the oversupply of drybulk carriers and the prevailing difficulty in obtaining financing for vessel purchases, have adversely affected drybulk vessel values, including the vessels in our fleet. As a result, we may not meet certain minimum asset coverage ratios and other financial ratios which are included in our loan agreements.

During 2013, we entered into amended loan agreements with our lenders, based on previously negotiated term sheets signed in December 2012. Under our $120.0 million and $26.0 million loan agreements with Commerzbank AG, we have agreed to amend, among other things, our minimum asset coverage ratio from 135% to 80% for the period ending December 31, 2013, to 85% for the six month period ending June 30, 2014, to 90% for the six month period ending December 31, 2014 and to 110% for the six month period ending June 30, 2015. Thereafter and until the repayment of the respective loans, the asset cover ratio will be set to its initial level of 135%. In addition, we have agreed to the deferral of payments of $16.7 million representing 60% of the value of the installments payable in year 2013 and 50% of the value of the installments payable in 2014, and to a prepayment of the loans of $2.0 million, which was made on December 31, 2012. The deferred amounts have been added to the loans' final installment, payable upon the expiration of the loan agreements in the fourth quarter of 2016.

We also amended the minimum asset coverage ratio under our $64.5 million loan agreement with HSH Nordbank AG, or HSH, which was reduced to 100% for the period ending December 31, 2012 and to 110% for the period from January 1, 2013 until December 31, 2013. Thereafter and until repayment of the loan, the asset cover ratio will return to 125%. In addition, we have agreed to the deferral of a minimum of approximately $3.5 million of the subsequent eight consecutive quarterly installments and to the release of approximately $7.4 million of pledged cash already held by HSH which was applied as prepayment of the loan facility on January 7, 2013. In connection to the sale of Star Sigma in April 2013, we were obliged to fully prepay the balance of the Capesize Tranche, amounting to $4.7 million, and the remaining $4.1 million balance from the sale proceeds was applied to the Supramax Tranche as a prepayment. As a result, the next seven scheduled quarterly installments which commenced in April 2013 were reduced on a pro-rata basis equal to the amount of the prepayment.

The amended terms of our $70.0 million loan agreement with Credit Agricole Corporate and Investment Bank, or Credit Agricole, among other things, reduce the asset coverage ratio from 120% to 105% until March 31, 2014 thereafter and until the repayment of the loan, the asset coverage ratio will return to 120%.

We agreed to reduce the asset coverage ratio of our $31.0 million loan agreement with ABN AMRO Bank from 100% to 75% for the period until December 31, 2014 and thereafter the asset coverage ratio will be set to the level as stated in the original agreement. In addition, we have agreed to reduce the minimum required liquidity to $500,000 per vessel, from $750,000, which resulted in the reclassification of restricted cash to free cash.

Certain of our loan agreements also require that members of the Pappas family at all times own at least 5% of our outstanding capital stock and Mr. Petros Pappas continue to be the non-executive Chairman of the board. Mr. Petros Pappas was recently re-elected as a director of the Board to serve until the 2016 annual meeting of shareholders. In addition, we agreed with certain of our lenders to increase our vessel management services to cover at least 10 third-party vessels by December 31, 2013.

Set forth below are financial and other covenants that are contained in our amended loan agreements that we are required to meet on certain testing dates. The terms used herein not otherwise defined shall have the meanings ascribed to them in the applicable loan agreements, which are incorporated by reference herein.

Credit Agricole Corporate and Investment Bank

The following financial and other covenants regarding our $70.0 million loan agreement with Credit Agricole Corporate and Investment Bank, or Credit Agricole, among others, were in effect as of December 31, 2012 and December 31, 2013:

"Asset coverage ratio" greater than 105%. As of December 31, 2012 and December 31, 2013, our "asset coverage ratio" was 121% and 173%, respectively.

"Maximum leverage ratio" less than 95%. As of December 31, 2012 and December 31, 2013, our "leverage ratio" was approximately 85% and 39%, respectively.

"Minimum Liquid funds" greater than $7.0 million, which is contingent upon the number of vessels owned by the Company. As of December 31, 2012 and December 31, 2013, our "liquid funds" were $20.0 million and $51.8 million, respectively.

ABN AMRO Bank

The following financial and other covenants regarding our $31.0 million loan agreement with ABN AMRO Bank, among others, were in effect as of December 31, 2012 and December 31, 2013:

"Asset coverage ratio" greater than 75%. As of December 31, 2012 and December 31, 2013, our "asset coverage ratio" was 92% and 160%, respectively.

"Minimum market value adjusted net worth" greater than $30.0 million. As of December 31, 2012 and December 31, 2013, our "minimum market value adjusted net worth" was approximately $66.7 million and $293.4 million, respectively.

"Maximum leverage ratio" less than 110%. As of December 31, 2012 and December 31, 2013, our "leverage ratio" was approximately 90% and 42%, respectively.

"Interest coverage ratio" greater than 1.5:1.0. As of December 31, 2012 and December 31, 2013, our "interest coverage ratio" was 5.2:1.0 and 4.9:1.0, respectively.

"Minimum liquid funds" greater than $7.0 million as of December 31, 2012 and $7.5 million as of December 31, 2013. "Minimum liquid funds" is contingent upon the number of vessels owned by the Company. As of December 31, 2012 and 2013, our "liquid funds" were $20.0 million and $51.8 million, respectively.

Commerzbank AG

The following financial and other covenants regarding our $120.0 million and $26.0 million loan agreements with Commerzbank AG, were in effect as of December 31, 2012 and December 31, 2013:

"Minimum asset coverage ratio" greater than 80%. As of December 31, 2012 and December 31, 2013, under the $120.0 million loan agreement with Commerzbank AG we had a "minimum asset coverage ratio" of 98% and 121%, respectively, and under the $26.0 million loan agreement, we had a "minimum asset coverage ratio" of 108% and 154%, respectively.

"Market value adjusted equity ratio" greater than 15%. As of December 31, 2012 and December 31, 2013, we had a "market value adjusted equity ratio" of approximately 22% and 59%, respectively.

"Minimum liquid funds" greater than $7.0 million and $7.5 million, as of December 31, 2012 and December 31, 2013, respectively. "Minimum liquid funds" is contingent upon the number of vessels owned by the Company. As of December 31, 2012 and December 31, 2013, our "liquid funds" were $20.0 million and $51.8 million, respectively.

Additional financial covenant requirement added, "Interest coverage ratio" greater than 1.5:1.0. As of December 31, 2012 and December 31, 2013, our "interest coverage ratio" was 5.2:1.0 and 4.9:1.0, respectively.

HSH Nordbank, AG

The following financial and other covenants regarding our $64.5 million loan agreement with HSH Nordbank AG, or HSH, were in effect as of December 31, 2012 and December 31, 2013:

"Minimum asset coverage ratio" greater than 110%. As of December 31, 2012 and December 31, 2013, our "asset coverage ratio" was 111% and 172%, respectively.

"Minimum liquidity" of $0.2 million for each mortgaged vessel under this credit facility. As of December 31, 2012 and December 31, 2013, we had "minimum liquidity" of $0.8 million and $0.6 million, respectively, based on the number of vessels under this credit facility at that date.

"Minimum market value adjusted net worth" greater than $30.0 million. As of December 31, 2012 and December 31, 2013, we had a "minimum market value adjusted net worth" of approximately $66.7 million and $288.1 million, respectively.

"Maximum leverage ratio" less than 90%. As of December 31, 2012 and December 31, 2013, we had a "leverage ratio" of approximately 79% and 41%, respectively.

"Interest coverage ratio" greater than 2.0:1.0. As of December 31, 2012 and December 31, 2013, our "interest coverage ratio" was 5.2:1.0 and 4.9:1.0, respectively.

As of December 31, 2013, we were in compliance with the financial and other covenants under all of our loan agreements. Please see "Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Senior Secured Credit Facilities" for a discussion of our credit facilities.

If we are not in compliance with our covenants and we are not able to obtain covenant waivers or modifications, our lenders could require us to post additional collateral, enhance our equity and liquidity, increase our interest payments or pay down our indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet, or they could accelerate our indebtedness, which would impair our ability to continue to conduct our business. If our indebtedness is accelerated, we might not be able to refinance our debt or obtain additional financing and could lose our vessels if our lenders foreclose their liens. In addition, if we find it necessary to sell our vessels at a time when vessel prices are low, we will recognize losses and a reduction in our earnings, which could affect our ability to raise additional capital necessary for us to comply with our loan agreements.

Currently, we are prohibited from paying dividends under our loan agreements and we may be unable to pay dividends in the future.

Under the terms of our recently agreed amendments to our loan agreements, we are prohibited from paying dividends until the later of (i) December 31, 2014, (ii) the repayment of the deferred amounts under our Commerzbank AG credit facilities, and (iii) complying with the original terms of our Credit Agricole credit facility dated January 20, 2011. In general, when dividends are paid, they are distributed on a quarterly basis from our operating surplus, in amounts that allow us to retain a portion of our cash flows to fund vessel or fleet acquisitions and for debt repayment and other corporate purposes, as determined by our management and board of directors.

In addition, the declaration and payment of dividends will be subject at all times to the discretion of our board of directors. The timing and amount of dividends will depend on our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividends, or if there is no surplus, dividends may be declared or paid out of net profits for the fiscal year.

We depend upon a few significant customers for a large part of our revenues and the loss of one or more of these customers could adversely affect our financial performance.

We derive a significant part of our charterhire from a small number of customers. For the year ended December 31, 2013, we derived 47% of our voyage revenues from two charterers, as presented in our statement of operations. Currently, six of our vessels are employed under fixed rate period charters to two customers. If one or more of these customers is unable to perform under one or more charters with us and we are not able to find a replacement charter, or if a customer exercises certain rights to terminate the charter, we could suffer a loss of revenues that could materially adversely affect our business, financial condition, results of operations and cash available for distribution as dividends to our shareholders.

We could lose a customer or the benefits of a time charter if, among other things:

·	the customer fails to make charter payments because of its financial inability, disagreements with us or otherwise;

·	the customer terminates the charter because we fail to deliver the vessel within a fixed period of time, the vessel is lost or damaged beyond repair, there are serious deficiencies in the vessel or prolonged periods of off-hire, default under the charter; or

·	the customer terminates the charter because the vessel has been subject to seizure for more than a specified number of days.

If we lose a key customer, we may be unable to obtain charters on comparable terms or may become subject to the volatile spot market, which is highly competitive and subject to significant price fluctuations.The loss of any of our customers or time charters, or a decline in payments under our charters, could have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends.

The failure of our charterers to meet their obligations under our charter agreements, on which we depend for substantially all of our revenues, could cause us to suffer losses or otherwise adversely affect our business.

Currently, six of our vessels are chartered on medium to long-term time charters with an average remaining term of approximately 1.23 years ten of our vessels are employed in what we consider to be the spot market due to the short duration of their current charter agreements and one of our vessels underwent its periodic dry-docking survey . For the year ended December 31, 2013, 47% of our voyage revenues-net of commissions were generated from two charterers. The ability and willingness of each of our counterparties to perform its obligations under a time charter agreement with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the drybulk shipping industry and the overall financial condition of the counterparties. Consistent with drybulk shipping industry practice, we have not independently analyzed the creditworthiness of the charterers. Charterers are sensitive to the commodity markets and may be impacted by market forces affecting commodities such as iron ore, coal, grain, and other minor bulks. In addition, in these depressed market conditions, certain charterers, including some of our charterers, are renegotiating the terms of the charters or defaulting on their obligations under the charters. In the event a charterer fails to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on charters may be at lower rates, depending on the then existing charter rate levels, compared to the rates currently being charged for our vessels.

We previously entered into time charters for Star Epsilon and Star Kappa that were scheduled to expire in 2014. We withdrew the vessels from their charterers' service because of the charterers' repudiatory breach of time charter agreements. Arbitration proceedings commenced against the charterers of the vessels in London to pursue damages arising from such breach, which includes the loss of hire. A conditional settlement agreement was signed on September 5, 2012, under which we received an aggregate cash payment of $5.0 million divided into seventeen installments. The first installment of $500,000 was received upon the execution of the settlement agreement and the next sixteen monthly installments varying between $250,000 and $500,000 were due the last day of each month from September 30, 2012 to December 2013. As of the date of this annual report the payment has been received in full.

Star Sigma was previously time chartered to pacific Bulk Shipping Ltd., or Pacific Bulk, for a minimum of 36 months and a maximum of 41 months. At Pacific Bulk's request, we agreed to extend the term of the time charter to a minimum of 56 months and a maximum of 61 months at a lower daily rate. On December 31, 2011, Star Sigma was redelivered to us early and on January 4, 2012, we entered into an agreement with Pacific Bulk to accept the early redelivery of the vessel in exchange for an aggregate of $6,454,000 consisting of a cash payment of $5,734,000 and 1,027 metric tons of fuel valued at $720,000.

On February 15, 2011, we received a letter from Korea Line Corporation, or KLC, the charterer of Star Gamma and Star Cosmo, notifying us of the commencement of rehabilitation proceedings of KLC in Korea and the related schedule for making registered claims against KLC in those proceedings. We have received certain awards pursuant to the rehabilitation plan which was approved by the required majority vote of KLC's lenders. These awards provided for payments in cash and in shares for a period of ten years to KLC's claimants.

On June 28, 2013, we received a letter from the receivers of STX Pan Ocean Co. Ltd., or STX, terminating the charter agreement for Star Borealis, effective immediately. Star Borealis was on time charter at an average gross daily charter rate of $24,750 for the period from September 11, 2011 until July 11, 2021. We intend to vigorously pursue all amounts owed to us under the charter agreement, including any related damages caused by the termination of the charterparty, under the STX rehabilitation proceedings which have commenced in Korea. As of December 31, 2013, STX owes us an amount of $653,788 for unpaid charter hire which along with a claim for damages for repudiation will be offset against the payable due to STX for the bunkers on vessel at the date of its early delivery.

Please see "Item 8. Financial Information – Consolidated statements and other financial information – Legal Proceedings" for a discussion of our legal proceedings.

We may be subject to litigation, arbitration and other proceedings that could have an adverse effect on our business.

On an ongoing basis, we are involved in litigation arising in the ordinary course of business, or otherwise. We may be exposed to litigation related to personal injury, environmental matters, contractual disagreements, taxes, securities, or maritime matters. We cannot predict with certainty the outcome or effect of any claim or other litigation matter, or a combination of these. If we are involved in any future litigation, or if our positions concerning current disputes are found to be incorrect, this may have an adverse effect on our business, financial position, results of operations and ability to pay dividends, because of potential negative outcomes, the costs associated with asserting our claims or defending such lawsuits, and the diversion of management's attention to these matters.

We may have difficulty managing our planned growth properly.

We have newbuilding contracts for nine drybulk vessels each with fuel efficient specifications, including three Newcastlemax vessels, two Capesize vessel and four Ultramax vessels, we also entered into agreements to acquire two Post-Panamax vessels, which were delivered to us in February and March 2014, respectively, and we intend to continue to expand our fleet, which may include our acquisition of a significant number of additional vessels. Our ability to manage our growth will primarily depend on our ability to:

·	locate and acquire suitable vessels;

·	identify and consummate acquisitions or joint ventures;

·	obtain required financing;

·	integrate any acquired vessels successfully with our existing operations;

·	hire, train, and retain qualified personnel and crew to manage and operate our growing business and fleet;

·	enhance our customer base; and

·	manage our expansion.

Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty experienced in obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. We may not be successful in executing our growth plans and may incur significant expenses and losses.

We are exposed to volatility in the London Interbank Offered Rate, or LIBOR, and have selectively entered into derivative contracts, which can result in higher than market interest rates and charges against our income.

As of December 31, 2013, we had $56.0 million in cash, including restricted cash, and outstanding borrowings of $190.3 million, all of which are secured by the vessels in our fleet. On December 24, 2013, we entered into a binding commitment letter with HSH Nordbank AG for a new senior secured credit facility of up to $35.0 million, to be used to partially finance the two Ultramax vessels Star Challenger and Star Fighter, which also provide the mortgage collateral for this senior credit facility. The final loan agreement was signed on February 6, 2014 and on February 10, 2014, the total amount of $35.0 million was drawn down. In addition, on January 27, 2014, we executed a commitment letter with Deutsche Bank AG for a new senior secured credit facility of up to $39.0 million, to be used to partially finance the two Post Panamax vessels Star Sirius and Star Vega, which also provide the mortgage collateral for this senior credit facility. The final loan agreement was signed on March 14, 2014 and on March 18, 2014, the total amount of $39.0 million was drawn down. Our secured credit facilities are advanced at a floating rate based on LIBOR, which has been stable, but was volatile in prior years, which can affect the amount of interest payable on our debt, and which, in turn, could have an adverse effect on our earnings and cash flow. In addition, in recent years, LIBOR has been at relatively low levels, and may rise in the future as the current low interest rate environment comes to an end. Our financial condition could be materially adversely affected at any time that we have not entered into interest rate hedging arrangements to hedge our exposure to the interest rates applicable to our credit facilities and any other financing arrangements we may enter into in the future, including those we will enter into to finance a portion of the amounts payable with respect to newbuildings. Moreover, even if we have entered into interest rate swaps or other derivative instruments for purposes of managing our interest rate exposure, our hedging strategies may not be effective and we may incur substantial losses.

We have selectively entered into derivative contracts, which will be effective in the second half of 2014, to fix our forward interest rate on $55.5 million of our outstanding indebtedness at an average rate of 1.71%. Entering into swaps and derivatives transactions is inherently risky and presents various possibilities for incurring significant expenses. Also, from time to time, we may take positions in other derivative instruments including freight derivatives, bunker derivatives and other derivative instruments. Generally, freight derivatives may be used to hedge a vessel owner's exposure to the charter market for a specified route and period of time, whereas bunker derivatives may be used to hedge the fluctuations in bunker prices. Upon settlement, if the contracted charter rate is less than the average of the rates, as reported by an identified index, for the specified route and time period, the seller of the freight derivative is required to pay the buyer an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days specified in the contract. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. If we take positions in freight derivatives or other derivative instruments we could suffer losses in the settling or termination of the freight or other derivative instruments.

The derivatives strategies that we employ in the future may not be successful or effective, and we could, as a result, incur substantial additional interest costs. See "Item 11. Quantitative and Qualitative Disclosures about Market Risk – Interest Rates", for a description of our interest rate swap arrangements.

In the highly competitive international drybulk shipping industry, we may not be able to compete for charters with new entrants or established companies with greater resources which may adversely affect our results of operations.

We employ our vessels in a highly competitive market that is capital intensive and highly fragmented. Competition arises primarily from other vessel owners, some of whom have substantially greater resources than us. Competition for the transportation of drybulk cargoes can be intense and depends on price, location, size, age, condition and the acceptability of the vessel and its managers to the charterers. Due in part to the highly fragmented market, competitors with greater resources could operate larger fleets through consolidations or acquisitions and may be able to offer more favorable terms.

A significant amount of our common shares are concentrated in the ownership of investment funds controlled by Oaktree Capital Management L.P., or Oaktree, and investment funds controlled by Monarch Alternative Capital LP, or Monarch, whose interests may not coincide with yours.

In connection with share purchases in our equity rights offering that was completed in July 2013 and our underwritten equity offering that was completed in October 2013, Oaktree and Monarch currently own common shares representing approximately 19.9% and 21.2%, respectively, of our issued and outstanding common shares. In connection with the equity rights offering we agreed with Oaktree and Monarch that each may appoint, subject to the approval of the Company's nominating committee, one individual for election to our board of directors as a Class B director. In July 2013, we appointed Mr. Roger Schmitz, the Monarch nominee, to our board of directors.

Oaktree and Monarch could have considerable influence on our corporate affairs and your interests as a holder of our common shares may differ from the interests of Oaktree and Monarch.

We may be unable to attract and retain key management personnel and other employees in the shipping industry, which may negatively affect the effectiveness of our management and our results of operations.

Our success depends to a significant extent upon the abilities and efforts of our management team. As of March 20, 2014 we had eighty employees, through our wholly owned subsidiaries, Star Bulk Management Inc., or Star Bulk Management, and Starbulk S.A. Our employees are engaged in the day to day management of the vessels in our fleet. Our success depends upon our ability to retain key members of our management team and our ability to recruit and hire suitable employees. The loss of any members of our senior management team could adversely affect our business prospects and financial condition. Difficulty in hiring and retaining personnel could adversely affect our results of operations. We do not maintain "key man" life insurance on any of our officers or employees of Star Bulk Management and/or Starbulk S.A.

We may be unable to attract and retain qualified, skilled employees or crew necessary to operate our business.

Our success depends in large part on the ability of us to attract and retain highly skilled and qualified personnel. In crewing our vessels, we require technically skilled employees with specialized training who can perform physically demanding work. Competition to attract and retain qualified crew members is intense due to the increase in the size of the global shipping fleet. If we are not able to obtain higher charter rates to compensate for any crew cost increases, it could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends. If we cannot hire, train and retain a sufficient number of qualified employees, we may be unable to manage, maintain and grow our business, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

As we expand our fleet, we will need to expand our operations and financial systems and hire new shoreside staff and seafarers to staff our vessels; if we cannot expand these systems or recruit suitable employees, our performance may be adversely affected.

We have newbuilding contracts for nine drybulk vessels each with fuel efficient specifications, including three Newcastlemax vessels, two Capesize vessels and four Ultramax vessels, and we entered into agreements to acquire two Post-Panamax vessels, which were delivered to us in February 2014 and March 2014, respectively. We have also entered into two bareboat agreements to bareboat charter for a period of 10 years, two 208,000 dwt Newcastlemax drybulk vessels to be built at SWS, with options to purchase the vessels at any time, and we have a purchase obligation upon the completion of the tenth year of the bareboat charterparty. We intend to continue to expand our fleet. Our operating and financial systems may not be adequate as we expand our fleet, and our attempts to implement those systems may be ineffective. In addition, we rely on our wholly-owned subsidiaries, Star Bulk Management and Starbulk S.A., to recruit shoreside administrative and management personnel and for crew management. Shoreside personnel are recruited by Star Bulk Management and Starbulk S.A. through referrals from other shipping companies and traditional methods of securing personnel, such as placing classified advertisements in shipping industry periodicals. Star Bulk Management, Starbulk S.A. and its crewing agent may not be able to continue to hire suitable employees as Star Bulk expands its fleet. If we are unable to operate our financial and operations systems effectively, recruit suitable employees or if our unaffiliated crewing agent encounters business or financial difficulties, our performance may be materially adversely affected.

Labor interruptions could disrupt our business.

Star Bulk Management and Starbulk S.A. currently provide the crew for all of our vessels, which are manned by masters, officers and crews that are employed by our shipowning subsidiaries. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could prevent or hinder our operations from being carried out normally and could have a material adverse effect on our business, results of operations, cash flows and financial condition.

The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.

Our vessels may call in ports where smugglers attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims or restrictions which could have an adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.

Our operations are subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These laws and regulations include, but are not limited to, the regulations of the International Maritime Organization, or IMO, including the International Convention on Civil Liability for Oil Pollution Damage of 1969, the International Convention on Civil Liability for Bunker Oil Pollution Damage, the International Convention for the Prevention of Pollution from Ships of 1973, including designations of Emission Control Areas thereunder, the IMO International Convention for the Safety of Life at Sea of 1974, the International Convention on Load Lines of 1966, the U.S. Oil Pollution Act of 1990, or OPA, requirements of the U.S. Coast Guard and the U.S. Environmental Protection Agency, or EPA, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the U.S. Clean Air Act, U.S. Clean Water Act and the U.S. Marine Transportation Security Act of 2002. Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of our vessels. We may also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions (including greenhouse gas emissions), the management of ballast and bilge waters, maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of our ability to address pollution incidents. Additionally, we cannot predict the cost of compliance with any new regulations that may be promulgated as a result of the 2010 BP plc Deepwater Horizon oil spill in the Gulf of Mexico.

These costs could have a material adverse effect on our business, results of operations, cash flows and financial condition. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault.

If our vessels fail to maintain their class certification and/or fail any annual survey, intermediate survey, dry-docking or special survey, that vessel would be unable to carry cargo, thereby reducing our revenues and profitability and violating certain covenants under our credit facilities.

Every ocean-going vessel must be "classed" by a classification society. The classification society certifies that the vessel is "in class," signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel's country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.

The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and/or to the regulations of the country concerned.

For maintenance of the class certification, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any special equipment classes are required to be performed as follows:

Annual Surveys: For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant, and where applicable for special equipment classed, within three months before or after each anniversary date of the date of commencement of the class period indicated in the certificate.

·	Intermediate Surveys: Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years after commissioning and each class renewal. Intermediate surveys are to be carried out at or between the occasions of the second or third annual survey.

Class Renewal Surveys: Class renewal surveys, also known as special surveys, are carried out for the ship's hull, machinery, including the electrical plant, and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey, the vessel is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of money may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a vessel owner has the option of arranging with the classification society for the vessel's hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle. Upon a vessel owner's request, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal.

Most vessels are also drydocked every 30 to 36 months for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a "recommendation" which must be rectified by the vessel owner within prescribed time limits.

If any vessel does not maintain its class and/or fails any annual survey, intermediate survey, dry-docking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our credit facilities. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations.

Our vessels may suffer damage due to the inherent operational risks of the seaborne transportation industry and we may experience unexpected drydocking costs, which may adversely affect our business and financial condition.

Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy and other circumstances or events. These hazards may result in death or injury to persons, loss of revenues or property, environmental damage, higher insurance rates, damage to our customer relationships, delay or rerouting. If our vessels suffer damage, they may need to be repaired at a drydocking facility. For example, the costs of drydock repairs are unpredictable and may be substantial. We may have to pay drydocking costs that our insurance does not cover in full. The loss of earnings while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, would decrease our earnings. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at a suitable drydocking facility or our vessels may be forced to travel to a drydocking facility that is not conveniently located to our vessels' positions. The loss of earnings while these vessels are forced to wait for space or travel to more distant drydocking facilities would decrease our earnings. In February 2012, Star Polaris sustained bottom damage when entering the port of Eregli in Turkey. The vessel proceeded to a shipyard for permanent repairs, which resulted in an off-hire period of 49 days and a loss of $0.8 million in revenues. Our insurers have reimbursed us for $1.6 million of expenditures related to repairs under our hull and machinery policies. In June 2012, Star Polaris, suffered engine failure in Korea, which resulted in 142 off-hire days and the loss of $2.3 million in revenues. Our insurers have reimbursed us for $7.7 million of expenditures related to repairs under our hull and machinery policies. We have entered into arbitration proceedings against the shipyard for the losses incurred as a result of the main engine failure in Korea, attributing same to the yard's liability.

The operation of drybulk carriers has certain unique operational risks. By their nature, drybulk cargoes are often heavy, dense, easily shifted, and react badly to water exposure, so the cargo and its interaction with the vessel can be a risk factor in and of itself. In addition, drybulk carriers are often subjected to battering treatment during unloading operations with grabs, jackhammers (to pry encrusted cargoes out of the hold), and small bulldozers. This treatment may cause damage to the drybulk carrier. Drybulk carriers damaged due to treatment during unloading procedures may be more susceptible to a breach to the sea. Hull breaches in drybulk carriers may lead to the flooding of their holds. If a drybulk carrier suffers flooding in its forward holds, the bulk cargo may become so dense and waterlogged that its pressure may buckle the drybulk carrier's bulkheads, leading to the loss of the drybulk carrier.

If we are unable to adequately maintain or safeguard our vessels we may be unable to prevent these events. Any of these circumstances or events could negatively impact our business, financial condition, results of operations and ability to pay dividends if reinstated in the future. In addition, the loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator.

Purchasing and operating secondhand vessels may result in increased operating costs and vessel off-hire, which could adversely affect our earnings.

On January 24, 2014, we entered into contracts to acquire two secondhand Post-Panamax vessels which were delivered to us in February 2014 and March 2014, respectively. Our inspection of secondhand vessels prior to purchase does not provide us with the same knowledge about their condition and cost of any required or anticipated repairs that we would have had if these vessels had been built for and operated exclusively by us. We will not receive the benefit of warranties on secondhand vessels.

Typically, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers.

Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations or the addition of new equipment, to our vessels and may restrict the type of activities in which the vessels may engage. As our vessels age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.

We inspected all of our secondhand vessels, which we acquired from both related and unrelated third parties, considered the age and condition of the vessels in budgeting for their operating, insurance and maintenance costs, and if we acquire additional secondhand vessels in the future, we may encounter higher operating and maintenance costs due to the age and condition of those additional vessels.

We may not have adequate insurance to compensate us for the loss of a vessel, which may have a material adverse effect on our financial condition and results of operation.

We have procured hull and machinery insurance, protection and indemnity insurance, which include environmental damage and pollution insurance coverage, and war risk insurance for our fleet. We do not maintain, for our vessels, insurance against loss of hire, which covers business interruptions that result from the loss of use of a vessel. We may not be adequately insured against all risks. We may not be able to obtain adequate insurance coverage for our fleet in the future. The insurers may not pay particular claims. Our insurance policies may contain deductibles for which we will be responsible, and limitations and exclusions which may increase our costs or lower our revenue. Moreover, insurers may default on claims they are required to pay. If our insurance is not enough to cover claims that may arise, the deficiency may have a material adverse effect on our financial condition and results of operations.

We may be subject to calls because we obtain some of our insurance through protection and indemnity associations.

We may be subject to increased premium payments, or calls, in amounts based on our claim records and the claim records of our fleet managers as well as the claim records of other members of the protection and indemnity associations (P&I Associations) through which we receive insurance coverage for tort liability, including pollution-related liability. In addition, our P&I Associations may not have enough resources to cover claims made against them. Our payment of these calls could result in a significant expense to us, which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Because we generate all of our revenues in dollars but incur a significant portion of our expenses in other currencies, exchange rate fluctuations could have an adverse impact on our results of operations.

We generate all of our revenues in dollars but we incur a portion of our expenses in currencies other than the dollar. This difference could lead to fluctuations in net income due to changes in the value of the dollar relative to the other currencies, in particular the Euro. Expenses incurred in foreign currencies against which the dollar falls in value can increase, decreasing our revenues. Further declines in the value of the dollar could lead to higher expenses payable by us.

We are a holding company, and depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations or to make dividend payments.

We are a holding company, and our subsidiaries, which are all directly and wholly owned by us, conduct all of our operations and own all of our operating assets. As a result, our ability to satisfy our financial obligations and to pay dividends to our shareholders depends on the ability of our subsidiaries to generate profits available for distribution to us and, to the extent that they are unable to generate profits, we may be unable to pay dividends to our shareholders. Currently, we and certain of our subsidiaries are prohibited from paying dividends to our shareholders and us until certain conditions a met under our loan agreements. Please see "Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Senior Secured Credit Facilities."

We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law, which may negatively affect the ability of public shareholders to protect their interests.

We are incorporated under the laws of the Republic of the Marshall Islands, and our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall slands Business Corporations Act, or BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, public shareholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction.

All of our assets are located outside of the United States. Our business is operated primarily from our offices in Athens, Greece. In addition, our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict you from enforcing a judgment against our assets or the assets of our directors and officers. Although you may bring an original action against us, our officers and directors in the courts of the Marshall Islands based on U.S. laws, and the courts of the Marshall Islands may impose civil liability, including monetary damages, against us, our officers or directors for a cause of action arising under Marshall Islands law, it may be impracticable for you to do so given the geographic location of the Marshall Islands.

Our Chairman has affiliations with Oceanbulk Group, which could create conflicts of interest.

Our Chairman, Mr. Petros Pappas, and his daughter Mrs. Milena-Maria Pappas, one of our directors, founded and are affiliated with the Oceanbulk Group, a group of related companies which are involved in the service sectors of the shipping industry. To the extent that the Oceanbulk Group owns and operates drybulk carriers, this ownership and operation could create conflicts of interest between us, on the one hand, and the Oceanbulk Group, on the other hand. These conflicts may arise in connection with the chartering, purchase, sale and operations of the vessels in our fleet versus drybulk carriers managed and owned by the Oceanbulk Group.

There is a risk that we could be treated as a U.S. domestic corporation for U.S. federal income tax purposes after the merger of Star Maritime with and into Star Bulk, with Star Bulk as the surviving corporation, or the Redomiciliation Merger, which would adversely affect our earnings.

Section 7874(b) of the U.S. Internal Revenue Code of 1986, as amended, or the "Code", provides that, unless certain requirements are satisfied, a corporation organized outside of the United States which acquires substantially all of the assets (through a plan or a series of related transactions) of a corporation organized in the United States will be treated as a U.S. domestic corporation for U.S. federal income tax purposes if shareholders of the U.S. corporation whose assets are being acquired own at least 80% of the non-U.S. acquiring corporation after the acquisition. If Section 7874(b) of the Code were to apply to Star Maritime and the Redomiciliation Merger, then, among other consequences, the Company, as the surviving entity of the Redomiciliation Merger, would be subject to U.S. federal income tax as a U.S. domestic corporation on its worldwide income after the Redomiciliation Merger. Upon completion of the Redomiciliation Merger and the concurrent issuance of stock to TMT Co. Ltd., or "TMT", a shipping company headquartered in Taiwan, under the acquisition agreements, the shareholders of Star Maritime owned less than 80% of the Company. Therefore, the Company believes that it should not be subject to Section 7874(b) of the Code after the Redomiciliation Merger. Star Maritime obtained an opinion of its counsel, Seward & Kissel LLP, or "Seward & Kissel", that Section 7874(b) of the Code should not apply to the Redomiciliation Merger. However, there is no authority directly addressing the application of Section 7874(b) of the Code to a transaction such as the Redomiciliation Merger where shares in a foreign corporation such as the Company are issued concurrently with (or shortly after) a merger. In particular, since there is no authority directly applying the "series of related transactions" or "plan" provisions to the post-acquisition stock ownership requirements of Section 7874(b) of the Code, the U.S. Internal Revenue Service, or the "IRS", may not agree with Seward & Kissel's opinion on this matter. Moreover, Star Maritime has not sought a ruling from the IRS on this point. Therefore, the IRS may seek to assert that we are subject to U.S. federal income tax on our worldwide income for taxable years after the Redomiciliation Merger, although Seward & Kissel is of the opinion that such an assertion should not be successful.

We may have to pay tax on U.S. source income, which would reduce our earnings.

Under the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as the Company and its subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source shipping income and such income is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the regulations promulgated thereunder by the U.S. Department of the Treasury.

We qualify for this statutory tax exemption and we took this position for U.S. federal income tax return reporting purposes for 2013 and and we intend to take this position for 2014. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption and thereby become subject to U.S. federal income tax on our U.S. source shipping income. For instance, we would no longer qualify for exemption under Section 883 of the Code for a particular taxable year if shareholders, other than qualified shareholders, with a 5% or greater interest in our common stock owned, in the aggregate, 50% or more of our outstanding common stock for more than half the days during the taxable year. Due to the factual nature of the issues involved, we can give no assurances with regard to our tax-exempt status or that of any of our subsidiaries.

If we are not entitled to the exemption under Section 883 of the Code for any taxable year, we would be subject during those years to a 4% U.S. federal income tax on our U.S. source shipping income, on a gross basis. The imposition of this tax would have a negative effect on our business and would result in decreased earnings.

U.S. tax authorities could treat us as a "passive foreign investment company," which could have adverse U.S. federal income tax consequences to U.S. shareholders.

We will be treated as a "passive foreign investment company," or "PFIC", for U.S. federal income tax purposes if either (1) at least 75% of our gross income for any taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of our assets produce, or are held for the production of, those types of "passive income," to which the Company refers to as "passive assets." For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property, and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute "passive income." U.S. shareholders of a PFIC may be subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC. In addition, U.S. shareholders of a PFIC may be required to file an annual report containing such information as the Secretary of the U.S. Department of the Treasury may require.

Based on our method of operation, we take the position for U.S. federal income tax purposes that we were not and are not currently, a PFIC with respect to any taxable year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time chartering activities as services income, rather than rental income. Accordingly, we take the position that our income from our time chartering activities does not constitute "passive income", and the assets that we own and operate in connection with the production of that income do not constitute "passive assets".

There is, however, no direct legal authority under the PFIC rules addressing our method of operation. In addition, we have not received an opinion of counsel with respect to this issue. We believe there is substantial legal authority supporting our position consisting of case law and IRS pronouncements concerning the characterization of income derived from these time charters as services income for other tax purposes. However, we note that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, there is a risk that the IRS or a court of law may not accept our position, and treat us as a PFIC. Moreover, we may constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of our operations.

If the IRS or a court were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders may face adverse U.S. federal income tax consequences. Under the PFIC rules, unless such U.S. shareholders make an election available under the Code (which election could itself have adverse consequences), such U.S. shareholders would be subject to U.S. federal income tax at the then highest income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common stock, as if the excess distribution or gain had been recognized ratably over the U.S. shareholder's holding period of our common stock.

Risks Relating to Our Common Stock

Certain stockholders hold registration rights, which may have an adverse effect on the market price of our common stock.

On September 20, 2011, we filed a registration statement on Form S-8 (File No. 333-176922) that covers the resale of up to 311,006 of our common shares that have been issued under our 2007, 2010 and 2011 equity incentive plans. We have included 485,783 common shares for resale in a universal shelf registration statement (File No. 333-180674), which was declared effective by the Commission July 17, 2012. A Form F-3 registration statement for 7,731,776 common shares was filed with the SEC pursuant to a registration rights agreement and declared effective on November 12, 2013 for shares held by Oaktree and Monarch. The resale of these common shares in addition to the offer and sale of the other securities included in such registration statements and in the Form S-8 may have an adverse effect on the market price of our common stock.

Anti-takeover provisions in our organizational documents could make it difficult for our stockholders to replace or remove our current board of directors or have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common stock.

Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult for our stockholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable.

These provisions include:

·	authorizing our board of directors to issue "blank check" preferred stock without stockholder approval;

·	providing for a classified board of directors with staggered, three year terms;

·	prohibiting cumulative voting in the election of directors; and

·	authorizing the board to call a special meeting at any time.

The market price of our common shares has fluctuated widely and may fluctuate widely in the future, or there may be no continuing public market for you to resell our common stock.

The market price of our common stock has fluctuated widely since our common shares began trading on the Nasdaq Global Select Market in December 2007, and may continue to do so as a result of many factors such as actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry, mergers and strategic alliances in the shipping industry, market conditions in the shipping industry, changes in government regulation, shortfalls in our operating results from levels forecast by securities analysts, announcements concerning us or our competitors and the general state of the securities market. Further, there may be no continuing active or liquid public market for our common stock.

The last reported sale price on Nasdaq on March 20, 2014 was $14.65 per share. If the market price of our common shares decreases below $5.00 per share, under stock exchange rules, our shareholders will not be able to use such shares as collateral for borrowing in margin accounts. This inability to continue to use our common shares as collateral may lead to sales of such shares creating downward pressure on and increased volatility in the market price of our common shares.

The shipping industry has been highly unpredictable and volatile. The market for common shares in this industry may be equally volatile. Therefore, we cannot assure you that you will be able to sell any of our common shares you may have purchased at a price greater than or equal to its original purchase price, or that you will be able to sell them at all.

Item 4. Information on the Company

A.	History and development of the Company

We were incorporated in the Marshall Islands on December 13, 2006. Our executive offices are located at c/o Star Bulk Management Inc., 40 Agiou Konstantinou Str., Maroussi 15124, Athens, Greece and our telephone number is 011 30 210 617 8400.

Star Maritime Acquisition Corp., or Star Maritime, was organized under the laws of the State of Delaware on May 13, 2005 as a blank check company formed to acquire, through a merger, capital stock exchange, asset acquisition or similar business combination, one or more assets or target businesses in the shipping industry. Following the formation of Star Maritime, its officers and directors were the holders of 601,795 common shares representing all of our then issued and outstanding capital stock. On December 21, 2005, Star Maritime consummated its initial public offering of 1,257,833 units, at a price of $150.00 per unit, each unit consisting of one share of Star Maritime common stock and one warrant to purchase one share of Star Maritime common stock at an exercise price of $120.00 per share. In addition, Star Maritime completed during December 2005 a private placement of an aggregate of 75,500 units, each unit consisting of one share of common stock and one warrant, to Mr. Pappas, our Chairman of the Board, Mr. Erhardt, one of our directors, Mr. Tsirigakis, our former Chief Executive Officer and former director and Mr. Syllantavos, our former Chief Financial Officer. The gross proceeds of the private placement of $11.3 million were used to pay all fees and expenses of the initial public offering and as a result, the entire gross proceeds of the initial public offering amounting to $188.7 million were deposited in a trust account maintained by American Stock Transfer & Trust Company. Star Maritime's common stock and warrants started trading on the American Stock Exchange under the symbols, SEA and SEA.WS, respectively on December 21, 2005.

On January 12, 2007, Star Maritime and Star Bulk entered into definitive agreements to acquire a fleet of eight drybulk carriers with a combined cargo-carrying capacity of approximately 692,000 dwt. from certain subsidiaries of TMT. These eight drybulk carriers are referred to as the initial fleet. The aggregate purchase price specified in the Master Agreement by and among the Company, Star Maritime and TMT, or the Master Agreement, for the initial fleet was $224.5 million in cash and 835,843 common shares, which were issued on November 30, 2007. As additional consideration for eight vessels, we agreed to issue 107,130 common shares to TMT in two installments as follows: (i) 53,565 additional common shares, no more than 10 business days following the filing of our Annual Report on Form 20-F for the fiscal year ended December 31, 2007, and (ii) 53,565 additional common shares, no more than 10 business days following the filing of our Annual Report on Form 20-F for the fiscal year ended December 31, 2008. The shares in respect of the first installment were issued to a nominee of TMT on July 17, 2008 and the shares in respect of the second installment were issued to a nominee of TMT on April 28, 2009.

On November 2, 2007, the Commission declared effective our joint proxy/registration statement filed on Forms F-1/F-4 and on November 27, 2007, we obtained shareholders' approval for the acquisition of the initial fleet and for effecting the Redomiciliation Merger as a result of which Star Maritime merged into Star Bulk with Star Maritime merging out of existence and Star Bulk being the surviving entity. Each share of Star Maritime common stock was exchanged for one share of Star Bulk common stock and each warrant of Star Maritime was assumed by Star Bulk with the same terms and conditions except that each became exercisable for common stock of Star Bulk. The Redomiciliation Merger became effective after stock markets closed on November 30, 2007, and the common shares and warrants of Star Maritime ceased trading on the American Stock Exchange under the symbols SEA and SEA.WS, respectively. Star Bulk shares and warrants started trading on the Nasdaq Global Select Market on December 3, 2007, under the ticker symbols SBLK and SBLKW, respectively. Immediately following the effective date of the Redomiciliation Merger, TMT and its affiliates owned 30.2% of our outstanding common stock. Mr. Nobu Su, a former member of our board of directors, exercises voting and investment control over the securities held of record by F5 Capital, a Cayman Islands corporation, which is a nominee of TMT. F5 Capital filed a Schedule 13D/A on July 29, 2008 reporting beneficial ownership of 7.0% of our outstanding common stock. All of our warrants expired worthless and ceased trading on the Nasdaq Global Select Market on March 15, 2010.

We began our operations on December 3, 2007 with the delivery of our first vessel Star Epsilon. Three of the eight vessels comprising our initial fleet were delivered to us by the end of December 2007. On December 3, 2007, we entered into an agreement to acquire an additional Supramax vessel, Star Kappa from TMT, which was not included in the initial fleet and was delivered to us on December 14, 2007. In 2008, we took delivery of the remaining five vessels that we purchased from TMT, plus an additional four vessels.

Vessel Acquisitions, Dispositions and Other Significant Transactions

Vessel Acquisitions

On February 18, 2010, we entered into an agreement to acquire from an unaffiliated third party, Star Aurora, a 2000 built, 171,000 dwt., Capesize drybulk vessel, for approximately $42.5 million. We financed the purchase of this vessel with a combination of cash and bank debt

On March 24, 2010, we entered into an agreement with Hanjin HHIC-Phil Inc. for the construction of Star Borealis, a 179,678 dwt Capesize drybulk vessel, for $53.6 million. The vessel was delivered to us on September 9, 2011.

On April 6, 2010, we entered into an agreement with Hanjin HHIC-Phil Inc. for the construction of Star Polaris, a 179,546 dwt Capesize drybulk vessel, for $53.3 million. The vessel was delivered to us on November 14, 2011.

We financed the construction of Star Borealis and Star Polaris described above with a combination of cash and bank debt.

On May 12, 2011, we entered into agreements to acquire Star Big and Star Mega, two secondhand Capesize vessels, with attached long term time charters, for an aggregate purchase price of approximately $51.5 million with long term time charters attached. Star Big has a carrying capacity of approximately 168,404 dwt and Star Mega has a carrying capacity of approximately 170,631 dwt. The vessels were acquired from companies in which family members of our Chairman held minority stakes, and were financed through a combination of our cash, bank debt, and a portion of the proceeds of an underwritten public offering that closed in July 2011. Star Big and Star Mega were delivered to us on July 25, 2011 and August 16, 2011, respectively.

On July 5, 2013 we entered into agreements with Shanghai Waigaoqiao Shipbuilding Co., or SWS, for the construction of two 180,000 dwt Capesize drybulk vessels, with fuel efficient specifications, Hull 1338 and Hull 1339, and expected deliveries in October 2015 and in January 2016, respectively. In August 2013, we paid the first installment of $28.5 million to SWS and the remaining amount is payable upon the delivery of each of the two Capesize drybulk vessels.

On September 23, 2013, we entered into agreements with SWS for the construction of two 208,000 dwt Newcastlemax drybulk vessels, with fuel efficient specifications, Hull 1342 and Hull 1343, with expected deliveries in January 2016 and in April 2016, respectively. In October 2013, we paid the first installment of $10.5 million to SWS and the remaining amount is payable in installments until the delivery of each of the two Newcastlemax drybulk vessels.

On September 27, 2013, we entered into agreements with Nantong COSCO KHI Ship Engineering Co., or NACKS, for the construction of two 61,000 dwt Ultramax drybulk vessels, Hull NE 196 and Hull NE 197, and one 209,000 dwt Newcastlemax drybulk vessel, Hull NE 198, each with fuel efficient specifications and expected deliveries in October 2015, November 2015 and March 2016, respectively. In October 2013, we paid the first installment of $22.1 million to NACKS and the remaining amount is payable in installments until their deliveries.

On October 22, 2013, we entered into contracts with Japan Marine United Corporation, or JMU, for the construction of two 60,000 dwt Ultramax drybulk vessels, Hull 5040 and Hull 5043, with fuel efficient specifications and expected deliveries in June 2015 and September 2015, respectively. In October 2013, we paid the first installment of $5.8 million to JMU and the remaining amount is payable in installments until their deliveries.

We refer to the above mentioned nine newbuilding vessels as our Newbuilding Vessels.

On November 5, 2013, we entered into two agreements to acquire Star Challenger and Star Fighter from two unaffiliated third parties for an aggregate price of approximately $58.1 million. Star Challenger and Star Fighter are 61,462 dwt and 61,455 dwt Ultramax vessels, built in 2012 and 2013, respectively. The vessels were delivered to us on December 12, 2013 and on December 30, 2013, respectively.

On January 24, 2014, we entered into agreements to acquire Star Vega and Star Sirius from Glocal Maritime Ltd., an unrelated third party, for an aggregate purchase price of $60.0 million. The vessels were delivered to us, in February 13, 2014 and March 7, 2014, respectively. Upon their delivery, the vessels were chartered back to Glocal Maritime Ltd., for a daily rate of $15,000 less brokerage commission of 1.25% until at least June 2016.

On February 17, 2014, we entered into agreements, or the Bareboat Charters, with CSSC (Hong Kong) Shipping Company Limited, or CSSC, an affiliate of Shanghai Waigaoqiao Shipbuilding Co. Ltd of China, or SWS, to bareboat charter two fuel efficient Newcastlemax dry bulk vessels (hull numbers 1372 and 1371) each with a cargo carrying capacity of 208,000 deadweight tons, which are currently under construction. The Bareboat Charters with monthly hire rates ranging between $361,958 to $410,813 plus Libor, per vessel and a 10-year term that is expected to commence when the vessels are delivered to us, which is scheduled for November 2015 and February 2016, respectively. Under the terms of the Bareboat Charters, we are required to pay CSSC $23.0 million equal to 20% of the construction price of $59.0 million for Hull 1372 and $56.5 million for Hull 1371, representing the upfront hire for the two CSSC Vessels in two equal installments, the first of which was paid on signing the Bareboat Charters and the second installment is due upon the completion of the steel-cutting stage of the construction of each CSSC Vessel. We are also obliged to pay an amount of $924,000 representing handling fees in two equal installments, the first of which was paid on signing the Bareboat Charters and the second installment is due in one year. Under the terms of the Bareboat Charters, we have options to purchase the CSSC Vessels at any time, which are exercisable on a monthly basis against a predetermined, amortizing balance payment whilst we have a respective obligation at the expiration of the bareboat term. Upon the earlier of the exercise of the purchase options or the expiration of the Bareboat Charters, we will own the CSSC Vessels.

Vessel Dispositions

On July 21, 2009, we entered into an agreement to sell Star Alpha to an unaffiliated third party for gross proceeds of approximately $19.9 million. We classified Star Alpha as an asset held for sale during the third quarter 2009 and as a result recorded an impairment loss of $75.2 million during the year ended December 31, 2009. We delivered the vessel to its purchasers on December 21, 2009.

On January 18, 2010, we entered into an agreement to sell Star Beta to an unaffiliated third party for gross proceeds of approximately $22.0 million. We classified Star Beta as an asset held for sale during the first quarter 2010 and as a result recorded an impairment loss of $34.9 million during the year ended December 31, 2010. We delivered the vessel to its purchasers owners on July 7, 2010.

On February 22, 2012, we entered into an agreement with a third party in order to sell Star Ypsilon, together with a quantity of 667 metric tons of fuel oil, for a contracted price of $9.13 million less address commission of 3% and brokerage commission of 2%. The vessel was delivered to its purchasers on March 9, 2012. In connection with the sale of Star Ypsilon, and in accordance with terms of the $64.5 million loan facility with HSH, on March 7, 2012 we repaid $7.36 million of the outstanding borrowings under that loan facility and the mortgage over the vessel was released.

On March 14, 2013, we entered into an agreement with a third party to sell Star Sigma for a contracted price of $9.0 million less address commission of 3% and brokerage commission of 1%. The vessel was delivered to its purchasers on April 10, 2013. On April 2, 2013, in connection with the sale of Star Sigma, and in accordance with the amended terms of the $64.5 million loan facility with HSH, we fully repaid the balance of Capesize Tranche amounting to $4.7 million and the remaining balance from the sale proceeds amounting to $4.1 million was applied as a prepayment of the Supramax Tranche. As a result, the next seven scheduled quarterly installments which commenced in April 2013 were reduced on a pro-rata basis equal to the amount of the prepayment and the mortgage over the vessel was released.

Other Significant Transactions

On January 20, 2011, we entered into a term loan agreement with Credit Agricole Corporate and Investment Bank for up to $70.0 million to partially finance the construction of our two Newbuildings, Star Borealis and Star Polaris, which were delivered to us in 2011. The total amount that was drawn down upon the delivery of each vessel totaled $67.275 million. Please see "Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Senior Secured Credit Facilities."

On February 15, 2011, we received a letter from KLC, a prior charterer of Star Gamma and Star Cosmo, notifying us of the commencement of rehabilitation proceedings of KLC in Korea and the related schedule for making registered claims against KLC in those proceedings. On March 31, 2011, we filed our registered claims with the Bankruptcy Division of the Korean courts relating to Star Gamma and Star Cosmo. The rehabilitation plan was approved by the required majority vote of KLC's lenders which provided for payments in cash and in shares for a period of ten years to KLC's counterparties in relation to the unsecured claims. In addition, and with respect to the common benefit claims (secured claims), following an agreement with the joint receivers of KLC, we agreed to settle the common benefit claim of Star Gamma by way of two equal annual cash payments in the aggregate amount of $344,857, the first installment was received in October 2011 and the second installment was received in January 2013. With respect to our claims related to Star Cosmo, pursuant to a separate agreement with the joint receivers of KLC, the due hire which represented the common benefit claim was paid directly from sub charterers to us and the remaining due hire representing unsecured claims is expected to be settled pursuant to the approved rehabilitation plan. As per rehabilitation plan, on December 31, 2012 we received the amounts of $12,055 and $740 representing the annual payment of the rehabilitation plan of Star Gamma and Star Cosmo, respectively. On November 19, 2012, we received 46,007 shares of KLC as part of the rehabilitation plan described above, the shares were sold the same date at the average price of KRW 3,456. The cash proceeds from the sale of the respective shares amounted to approximately $144,000. The next allotment of 2,872 shares as part of the award relating to Star Cosmo was released from lock up on June 4, 2013 and the respective shares have not been sold. In addition, in October 2013, we received an amount of $166,545 and $10,388 for Star Gamma and Star Cosmo, respectively, pursuant to the terms of the rehabilitation plan.

On July 21, 2011, we entered into a $31.0 million senior secured credit facility with ABN AMRO Bank N.V. to partially finance the purchase of Star Big and Star Mega. As of December 31, 2011, the total amount of this loan facility has been drawn down. Please see "Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Senior Secured Credit Facilities."

On July 22, 2011, we offered and sold 1,113,334 common shares in an underwritten public offering. This offering was priced at $27.0 per share, less underwriting discounts, which resulted in net proceeds to us before expenses of approximately $28.8 million. We used the net proceeds from this offering to fund a portion of the aggregate purchase price of Star Big and Star Mega, and for general corporate purposes.

On August 10, 2011, our board of directors reinstated our share repurchase plan to acquire up to a maximum of $3.0 million of our common shares at a maximum price of $19.50 per share. On November 9, 2011, our board of directors extended the duration of the share repurchase plan until December 31, 2012. All shares to be purchased under the plan shall be in the sole discretion of our board of directors and in compliance with the plan. In addition, the repurchased common shares shall be cancelled, and removed from our share capital and returned to our authorized unissued common shares. No shares were repurchased during the year ended December 31, 2011. During the year ended December 31, 2012, we repurchased an aggregate of 61,730 common shares at an average price of $13.94 per share and have $2.1 million of remaining capacity under the plan.

On October 3, 2011, we entered into a $64.5 million secured term loan agreement with HSH Nordbank, which has up to a five year term and bears interest at LIBOR plus margin. The borrowings under this loan agreement together with $5.3 million of own cash were used to repay in full the outstanding borrowings under our two loan facilities with Piraeus Bank. Please see "Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Senior Secured Credit Facilities."

On January 4, 2012, we entered into an agreement with Pacific Bulk to accept the early redelivery to us of Star Sigma on December 31, 2011 in exchange for an aggregate of $6.454 million consisting of a cash payment of $5.734 million and 1,027 metric tons of fuel valued at $0.720 million.

On September 27, 2012, Starbulk S.A. entered into an agreement with Maiden Voyage LLC, a Marshall Islands company, for the commercial and technical management of the Maiden Voyage, a 2012 built Supramax dry bulk carrier. Pursuant to the terms of this management agreement, we received a fixed management fee of $750 per day beginning on September 28, 2012. On August 6, 2013, Maiden Voyage was sold to Premier Voyage LLC, a Marshall Islands company, and our technical and commercial management agreement was terminated. On the same date Starbulk S.A. entered into an agreement with Premier Voyage LLC for the commercial and technical management of the Maiden Voyage, under the same terms as the previously terminated agreement. This vessel will be managed under the same strategy as the other vessels in our fleet. Maiden Voyage LLC and Premier Voyage LLC are owned and controlled by Oceanbulk Carriers LLC, a company minority owned by our directors, Mrs. Milena-Maria Pappas.

Effective as of the opening of trading on October 15, 2012, we affected a 15-for-1 reverse stock split of our common shares. The reverse stock split was approved by shareholders at our 2012 Annual General Meeting of Shareholders held on September 7, 2012. The reverse stock split reduced the number of our common shares from 81,012,403 to 5,400,810 and affected all issued and outstanding common shares. Shareholders received cash in lieu of fractional shares and no fractional shares were issued in connection with the reverse split. On October 12, 2012, we amended and restated our articles of incorporation, which were included in a Form 6-K furnished to the Commission on October 15, 2012.

On October 18, 2012, Starbulk S.A. entered into an agreement with OOCAPE1 Holdings LLC, a Marshall Islands company, for the commercial and technical management of the Obelix, a 2011 built Capesize dry bulk carrier. Pursuant to the terms of this management agreement, we will receive a fixed management fee of $750 per day beginning on October 19, 2012 and until two months after termination by either party upon written notice. This vessel will be managed under the same strategy as the other vessels in our fleet. OOCAPE1 Holdings LLC is owned and controlled by Oceanbulk Carriers LLC, a company minority owned by one of our directors, Mrs. Milena-Maria Pappas.

In February 2012, Star Polaris sustained bottom damage when entering the port of Eregli in Turkey; the vessel proceeded for permanent repairs to a shipyard, which resulted in an off-hire period of 49 days. Our insurers have reimbursed us for $1.6 million of expenditures related to repairs under our hull and machinery policies.

In June 2012, Star Polaris had a main engine failure in Korea, which resulted in an off-hire period of 142 days. Our insurers have reimbursed us for $7.7 million of expenditures related to repairs under our hull and machinery policies.

On July 25, 2013, pursuant to a rights offering, approved by our board of directors in April 2013, the "Rights Offering" we issued and sold 15,338,861 shares of common stock, which resulted in net proceeds of $77.9 million after deducting offering expenses of $2.2 million. The net proceeds were primarily used for orders for fuel-efficient dry-bulk vessels with some of the proceeds being reserved for working capital and general corporate purposes. In connection with the Rights Offering we entered into a purchase agreement, or the Backstop Purchase Agreement dated May 1, 2013, with a number of backstop investors including investment funds managed by Oaktree Capital Management L.P. or its affiliates, or Oaktree, and investment funds managed by Monarch Alternative Capital L.P., or Monarch. Also in connection with the Rights Offering entered into a registration rights agreement dated May 1, 2013, of the Registration Rights Agreement with Oaktree and Monarch.

Pursuant to the Registration Rights Agreement we filed Form F-3 registration statement, which was declared effective on November 12, 2013 for the registration of 7,731,776 of our common shares held by Oaktree and Monarch.

Pursuant to the Backstop Purchase Agreement, we issued and sold 9,117,653 shares of common stock. In addition, we agreed with each of Oaktree and Monarch, to appoint, subject to the approval of the Company's nominating committee, one individual to our board of directors as a Class B director. In August 2013, we appointed Mr. Roger Schmitz, the Monarch nominee, to our board of directors. Oaktree and Monarch also agreed that neither it nor its affiliates will (i) acquire beneficial ownership measured by voting power of more than 40.0% of our issued and outstanding common shares; (ii) form or participate in a "group" as defined in Section 13(d)(3) of the Exchange Act with respect to our securities after giving effect to which it would be deemed to beneficially own more than 40.0% of the issued and outstanding common shares; or (iii) initiate or participate in any "freeze-out" merger or other going private transaction with respect to us.

During the year 2013 and as of March 20, 2014, Starbulk S.A. entered into additional vessel management agreements for ten drybulk vessels for a fixed fee of $750 per day per vessel. Nine of these additional vessels that we manage are owned by companies owned and controlled by Oceanbulk Shipping LLC, a company minority owned by Ms. Milena - Maria Pappas, one of our directors. These agreements may be terminated by either party upon advanced written notice to the other party. We provide these services pursuant to the same strategy applied to the vessels in our owned fleet.

In September 2013, we issued 239,333 common shares that were awarded to our directors, officers and employees under the 2011 and 2013 Equity Incentive Plans. All the newly issued shares will vest on March 21, 2014. In addition, on the same day we issued 18,667 common shares, which represented the second and the third share installments awarded to Mr. Spyros Capralos, our Chief Executive Officer, pursuant to the terms of his consultancy agreement effective February 7, 2011. The second installment vested on February 7, 2013 and the third installment vested on February 7, 2014.

During the third quarter of 2013, we entered into amended loan agreements with our lenders, based on previously negotiated terms sheets signed in December 2012. The amended terms include among other things, the deferral of up to approximately $24.3 million from the installments payable until 2015 and the waiver or amendment of certain of the existing financial covenants. Please see "Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Senior Secured Credit Facilities."

On October 7, 2013, we issued and sold 8,050,000 common shares in an underwritten public offering. This offering was priced at $8.80 per share, which resulted in net proceeds of approximately $68.1 million after deducting offering expenses of $2.7 million. We used the net proceeds from this offering partially fund the acquisition of our newbuilding vessels, for vessel acquisitions, and for general corporate purposes.

On November 25, 2013, our board of directors approved to pay Oceanbulk Maritime S.A. a commission fee relative to the negotiations with the shipyards on the construction of our contracted Newbuilding Vessels. Oceanbulk Maritime S.A is a ship management company and is controlled by one of our directors, Mrs. Milena Maria Pappas. We agreed to pay a commission of 0.5% of the shipbuilding contract price for the two Newbuilding Capesize Vessels and the three Newbuilding Newcastlemax Vessels and a flat fee of $200,000 per vessel for the four Newbuilding Ultramax Vessels. For all of our nine Newbuilding Vessels, the total commissions payable are $2.08 million. We agreed to pay the commissions in four equal installments, the first two installments will be paid in cash and the remaining two installments will be paid with the issuance of common shares. The first installment of $0.52 million was paid in cash in December 2013 and the second installment will be paid in April 2014. The last two installments, to be paid with the issuance of common shares, are due in June 2015 and in April 2016, respectively.

On December 24, 2013, we entered into a binding commitment letter with HSH Nordbank AG for a new senior secured credit facility of up to $35.0 million, to be used to partially finance the two Ultramax vessels Star Challenger and Star Fighter, which also provide the mortgage collateral for this senior credit facility. On February 6, 2014, the final loan agreement was signed and on February 10, 2014, the total amount of $35.0 million was drawn down.

On January 27, 2014, we entered into a binding commitment letter with Deutsche Bank AG for a new senior secured credit facility of up to $39.0 million, to be used to partially finance the two Post-Panamax vessels Star Sirius and Star Vega, which also provide the mortgage collateral for this senior credit facility. On March 14, 2014, the final loan agreement was signed and on March 18, 2014, the total amount of $39.0 million was drawn down.

On February 20, 2014, our board of directors approved the Company's 2014 Equity Incentive Plan (the "2014 Equity Incentive Plan"). We reserved a total of 430,000 shares of common stock for issuance under the 2014 Equity Incentive Plan, subject to adjustment for changes in capitalization as provided in such plan. All of the material provisions of the 2014 Equity Incentive Plan are substantially similar to the provisions contained in our prior equity incentive plans. On February 20, 2014, 402,167 restricted common shares were granted to certain of our directors, officers and employees. The fair value of each share was $10.86 and has been determined by reference to the closing price of our common stock on the grant date. The respective shares will be issued in March 2014 and will vest in March 2015. In addition, we plan to issue 9,333 common shares to our chief executive officer in March 2014 and the shares will vest on May 3, 2014 under the terms of his consultancy agreement dated May 3, 2013.

On February 25, 2014, we acquired 33% of the total outstanding common stock of Interchart Shipping Inc., or Interchart, a Liberian company affiliated with family members of our Chairman, which acts as chartering broker to our fleet for a total consideration of $400,000 consisting of $200,000 in cash and 22,598 SBLK restricted common shares to be issued on March 31, 2014. The ownership interest was purchased from an entity affiliated with family members of our Chairman, including our director, Mrs. Milena-Maria Pappas.

On February 25, 2014, we entered into a services agreement, or the Services Agreement, with Interchart for chartering, brokering and commercial services for our vessels for an annual fee of €500,000 (approx. $690,000, using the exchange rate as of December 31, 2013, eur/usd 1.38). This fee is adjustable for changes in our fleet pursuant to the terms of the Services Agreement. Under the Services Agreement, all previously agreed upon brokerage commissions due to Interchart are canceled retroactively from January 1, 2014.

Business overview

Introduction

We are an international company providing worldwide transportation of drybulk commodities through our vessel-owning subsidiaries for a broad range of customers of major and minor bulk cargoes including iron ore, coal, grain, cement and fertilizer. We were incorporated in the Marshall Islands on December 13, 2006 as a wholly-owned subsidiary of Star Maritime Acquisition Corp., or Star Maritime. We merged with Star Maritime on November 30, 2007 and commenced operations on December 3, 2007, which was the date we took delivery of our first vessel.

Our Fleet

We own and operate a fleet of 17 vessels consisting of five Capesize drybulk carriers, two Post Panamax drybulk carriers, two Ultramax drybulk carriers and eight Supramax drybulk carriers with an average age of 8.9 years and a combined cargo carrying capacity of approximately 1,610,935 dwt. Our fleet carries a variety of drybulk commodities including coal, iron ore, and grains, or major bulks, as well as bauxite, phosphate, fertilizers and steel products, or minor bulks. We currently have ten vessels that we consider to be employed in the spot market due to the short duration of their current charter agreements, six of our vessels on medium to long term charters scheduled to expire in June 2014, August 2014, November 2015 and June 2016 and one vessel under its periodic dry-docking survery.

In addition to our owned fleet, we have also entered into agreements for the construction of eleven drybulk carriers.

We also provide commercial and technical management services to five Capesize drybulk carriers, two Post Panamax drybulk carriers, two Kamsarmax drybulk carriers, two Panamax drybulk carriers and three Supramax drybulk carriers.

The following tables present summary information concerning our owned fleet and third party managed vessels as of March 20, 2014:

Owned Vessels

Vessel Name	Vessel	Size	Year		Daily Gross	Type/
Vessel Name	Type	(dwt.)	Built		Hire Rate	Month of Contract Expiry
Star Aurora	Capesize	171,199	2000	$	17,000	Time charter/ August 2014
Star Big	Capesize	168,404	1996	$	25,000	Time charter/ November 2015
Star Borealis (1)	Capesize	179,678	2011	$	Freight 27.75/mt	Voyage charter/ May 2014
Star Mega	Capesize	170,631	1994	$	24,500	Time charter/ August 2014
Star Polaris (1) (2)	Capesize	179,600	2011	$	15,500	Time charter/ May 2014
Star Sirius	Post Panamax	98,681	2011	$	15,000	Time charter/ June 2016
Star Vega	Post Panamax	98,681	2011	$	15,000	Time charter/ June 2016
Star Challenger (1)	Ultramax	61,462	2012	$	9,500	Time charter/ March 2014
Star Fighter (1)	Ultramax	61,455	2013	$	13,400	Time charter/ April 2014
Star Cosmo (1)	Supramax	52,247	2005	$	13,500	Time charter/ May 2014
Star Delta (1)	Supramax	52,434	2000	$	14,500	Time charter/ September 2014
Star Epsilon	Supramax	52,402	2001	$	-	Dry-docking survey
Star Gamma	Supramax	53,098	2002	$	9,400	Time charter/ June 2014
Star Kappa (1)	Supramax	52,055	2001	$	13,000	Time charter/ March 2014
Star Omicron (1)	Supramax	53,489	2005	$	14,000	Time charter/ March 2014
Star Theta (1)	Supramax	52,425	2003	$ $	3,500 for the first 65 days 10,000 for next days	Time charter/ March 2014
Star Zeta (1)	Supramax	52,994	2003	$	14,000	Time charter/ March 2014

(1)	We consider these vessels to be employed in the spot market as a result of the short duration of their current charters.

(2)	In addition to daily gross hire rate, we received a ballast bonus of $1,875,000 on March 12, 2014 in connection with the repositioning of the vessel by the charterer.

Newbuilding Vessels

Please find below a list of vessels for which we have newbuilding contracts:

Vessel Name	Type	DWT	Shipyard	Expected Delivery Date
Hull 1372(1)	Newcastlemax	208,000	SWS	November 2015
Hull 1342	Newcastlemax	208,000	SWS	January 2016
Hull 1371(1)	Newcastlemax	208,000	SWS	February 2016
Hull NE 198	Newcastlemax	209,000	NACKS	March 2016
Hull 1343	Newcastlemax	208,000	SWS	April 2016
Hull 1338	Capesize	180,000	SWS	October 2015
Hull 1339	Capesize	180,000	SWS	January 2016
Hull 5040	Ultramax	60,000	JMU	June 2015
Hull 5043	Ultramax	60,000	JMU	September 2015
Hull NE 196	Ultramax	61,000	NACKS	October 2015
Hull NE 197	Ultramax	61,000	NACKS	November 2015

(1)	We have entered into bareboat charters for these vessels with the option to purchase the vessels at any time and a purchase obligation upon the completion of the tenth year of the bareboat charterparty.

Vessels Under Management

Drybulk Vessels
Vessel Name	Type	DWT	Year Built
Big Bang (1)	Capesize	174,109	2007
Big Fish (1)	Capesize	177,662	2004
Kymopolia (1)	Capesize	176,990	2006
Obelix (1)	Capesize	181,433	2011
Pantagruel (1)	Capesize	180,181	2004
Amami (1)	Post Panamax	98,681	2011
Madredeus (1)	Post Panamax	98,681	2011
Mercurial Virgo (1)	Kamsarmax	81,545	2011
Pendulum (1)	Kamsarmax	82,619	2006
Marto	Panamax	74,470	2001
Renascentia	Panamax	74,732	1999
Maiden Voyage (1)	Supramax	58,722	2012
Serenity I	Supramax	53,688	2006
Strange Attractor (1)	Supramax	55,742	2006

__________

(1) Vessels owned and controlled by Oceanbulk Shipping LLC, a company minority owned by Mrs. Milena- Maria Pappas, one of our directors.

We actively manage the deployment of our fleet on time charters, which generally can last up to several years. We currently have ten vessels that we consider to be employed in the spot market due to the short duration of their current charter agreements, six of our vessels on medium to long term charters scheduled to expire in June 2014, August 2014, November 2015 and June 2016 and one vessel under its periodic dry-docking survery. Under time charters, the charterer pays voyage expenses such as port, canal and fuel costs. We pay for vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, as well as for commissions. In both cases, we are responsible for the drydocking costs relating to each vessel. Our vessels operate worldwide within the trading limits imposed by our insurance terms and we do not operate our vessels in areas where United States, European Union or United Nations sanctions have been imposed.

Competition

Demand for drybulk carriers fluctuates in line with the main patterns of trade of the major drybulk cargoes and varies according to changes in the supply and demand for these items. We compete with other owners of drybulk carriers in the Newcastlemax, Capesize, Post Panamax, Ultramax and Supramax size sectors. Ownership of drybulk carriers is highly fragmented and is divided among approximately 1,700 independent drybulk carrier owners. We compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on our reputation as an owner and operator.

We believe that we possess a number of strengths that provide us with a competitive advantage in the dry bulk shipping industry:

We own a modern, diverse, high quality fleet of dry bulk carriers. Our fleet consists of seventeen vessels currently in the water, while we have eleven high specification, fuel efficient, "eco" friendly vessels, on order at quality shipyards in China and Japan. We believe that owning a modern, high quality fleet reduces operating costs, improves safety and provides us with a competitive advantage in securing favorable time charters. We maintain the quality of our vessels by carrying out regular inspections, both while in port and at sea, and adopting a comprehensive maintenance program for each vessel. Furthermore Star Bulk takes a pro-active approach to safety and environmental protection by implementing comprehensive planned maintenance systems, preventive maintenance programs and by retaining and training qualified crews.

We benefit from strong relationships with members of the shipping and financial industries. Our Chairman, directors and management team have established relationships with leading charterers as well as chartering, sales and purchase brokerage houses around the world. The Chairman, directors and management team have maintained relationships with, and have achieved acceptance by, major governmental and private industrial users, commodity producers and traders.

We have an experienced management team and board of directors. Our management team and our board of directors, collectively, have more than 100 years shipping experience during which they have developed strong industry relationships with leading charterers, financial institutions, shipyards, insurance underwriters, protection and indemnity associations.

We conduct all of the commercial and technical management of our vessels in-house through our wholly owned subsidiaries Starbulk S.A. and Star Bulk Management Inc. We believe having in-house commercial and technical management provides us with a competitive advantage over many of our competitors by allowing us to more closely monitor our operations and to offer higher quality performance, reliability and efficiency in arranging charters and the maintenance of our vessels. We also believe that in-house management capabilities contribute significantly in maintaining a lower level of vessel operating and maintenance costs. Aside from our owned vessels, we provide ship management services to fourteen vessels owned by third party owners, which diversifies our consolidated cash flows.

Customers

As of March 20, 2014, our vessels were chartered as follows: Rio Tinto for Star Aurora, major international companies for Star Big and Star Mega, Glocal Maritime Ltd for Star Sirius and Star Vega, Noble Chartering Inc. BVI for Star Polaris and Star Borealis, Cargill for Star Gamma and Star Kappa, MUR Shipping B.V for Star Delta, S. Refined Success Ltd. for Star Cosmo, EDF Man Shipping for Star Omicron, Hyundai Glovis Co Ltd for Star Fighter, Hyundai Merchant Marine Co. Ltd. Seoul for Star Challenger, Mandarin Marine Co Ltd for Star Theta, TRI-NET (Japan) Inc. for Star Zeta. For the year ended December 31, 2013, we derived 47% of our voyage revenues from two of our customers.

Seasonality

Demand for vessel capacity has historically exhibited seasonal variations and, as a result, fluctuations in charter rates. This seasonality may result in quarter-to-quarter volatility in our operating results for vessels trading in the spot market. The drybulk sector is typically stronger in the fall and winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere. Seasonality in the sector in which we operate could materially affect our operating results and cash available for dividends.

Management of the Fleet

As of December 31, 2013, we had sixty-seven employees, engaged in the day to day management of the vessels in our fleet. Star Bulk Management and Starbulk S.A. perform operational and technical management services for the vessels in our fleet, including chartering, marketing, capital expenditures, personnel, accounting, paying vessel taxes and maintaining insurance. Our Chief Executive Officer and Chief Financial Officer are also the senior management of Star Bulk Management and Starbulk S.A.. Star Bulk Management and Starbulk S.A. employ such a number of additional shore-based executives and employees designed to ensure the efficient performance of their activities.

We reimburse and/or advance funds as necessary to Star Bulk Management and Starbulk S.A. in order for our managers to conduct their activities and discharge their obligations, at cost. We also maintain working capital reserves as may be agreed upon between us and Star Bulk Management from time to time.

Star Bulk Management is responsible for the management of the vessels. Star Bulk Management's responsibilities include, inter alia, locating, purchasing, financing and selling vessels, deciding on capital expenditures for the vessels, paying vessels' taxes, negotiating charters for the vessels, managing the mix of various types of charters, developing and managing the relationships with charterers and the operational and technical managers of the vessels. Star Bulk Management subcontracts certain vessel management services to Starbulk S.A.

Starbulk S.A., our wholly owned subsidiary, provides the technical and crew management of all of our vessels. Technical management includes maintenance, drydocking, repairs, insurance, regulatory and classification society compliance, arranging for and managing crews, appointing technical consultants and providing technical support.

Starbulk S.A. has entered into agreements for the commercial and technical management of five Capesize drybulk carriers, two Post Panamax drybulk carriers, two Kamsarmax drybulk carriers, two Panamax drybulk carriers and three Supramax drybulk carriers. Pursuant to the terms of the management agreements, we receive a fixed management fee of $750 per day until terminated by either party upon two months prior written notice. These vessels are managed under the same strategy as the other vessels in our fleet. In addition, we are required under our amended loan agreements to expand the number of third party vessels under management to 10 vessels.

Crewing

Star Bulk Management is responsible for recruiting, either directly or through a technical manager or a crew manager, the senior officers and all other crew members for the vessels in our fleet. Star Bulk Management has the responsibility to ensure that all seamen have the qualifications and licenses required to comply with international regulations and shipping conventions, and that the vessels are manned by experienced and competent and trained personnel. Star Bulk Management is also responsible for insuring that seafarers' wages and terms of employment conform to international standards or to general collective bargaining agreements to allow unrestricted worldwide trading of the vessels. Star Bulk Management and Starbulk S.A. provide the crewing management for all the vessels in our fleet, including all of the third-party vessels.

The International Drybulk Shipping Industry

Drybulk cargo is cargo that is shipped in large quantities and can be easily stowed in a single hold with little risk of cargo damage. In 2013, based on preliminary figures, it is estimated that approximately 4.3 billion tons of drybulk cargo was transported by sea.

The demand for drybulk carrier capacity is derived from the underlying demand for commodities transported in drybulk carriers, which is influenced various factors such as broader macroeconomic dynamics, globalization trends, industry specific factors, geological structure, political factors, and weather. The demand for drybulk carriers is determined by the volume and geographical distribution of seaborne drybulk trade, which in turn is influenced by general trends in the global economy and factors affecting demand for commodities. During the 1980s and 1990s seaborne drybulk trade increased by 1-2% per annum. However, over the last decade, between 2003 and 2013, seaborne drybulk trade increased at a compound annual growth rate of 6.4%, substantially influenced by the entrance of China in the World Trade Organization ("WTO") The global drybulk carrier fleet may be divided into four categories based on a vessel's carrying capacity. These categories consist of:

·	Newcastlemax vessels, which are vessels with carrying capacities of between 200,000 and 215,000 dwt. These vessels carry both iron ore and coal and they represent the largest vessels able to enter the port of Newcastle in Australia.

·	Capesize vessels, which have carrying capacities of more than 100,000 dwt. and less than 200,000 dwt. These vessels generally operate along long-haul iron ore and coal trade routes. There are relatively few ports around the world with the infrastructure to accommodate vessels of this size.

Post-Panamax vessels have a carrying capacity of between 85,000 and 100,000 dwt. These vessels tend to have a shallower draft and larger beam than a standard Panamax vessel with a higher cargo capacity. These vessels have been designed specifically for loading high cubic cargoes from draught restricted ports, although they cannot transit the Panama Canal at its current dimensions. They will be able though to transit the Panama Canal once its scheduled expansion is completed.

Panamax vessels have a carrying capacity of between 65,000 and 85,000 dwt. These vessels carry coal, grains, and, to a lesser extent, minor bulks, including steel products, forest products and fertilizers. Panamax vessels are able to pass through the Panama Canal making them more versatile than larger vessels.

·	Ultramax vessels, which are vessels with carrying capacities of between 60,000 and 65,000 dwt and they represent the largest and most modern version of Supramax bulk carrier vessels.

Handymax vessels have a carrying capacity of between 35,000 and 60,000 dwt. The subcategory of vessels that have a carrying capacity of between 45,000 and 60,000 dwt are called Supramax. These vessels operate along a large number of geographically dispersed global trade routes mainly carrying grains and minor bulks. Vessels below 60,000 dwt are sometimes built with on-board cranes enabling them to load and discharge cargo in countries and ports with limited infrastructure.

Handysize vessels have a carrying capacity of up to 35,000 dwt. These vessels carry exclusively minor bulk cargo. Increasingly, these vessels have operated along regional trading routes. Handysize vessels are well suited for small ports with length and draft restrictions that may lack the infrastructure for cargo loading and unloading.

The supply of drybulk carriers is dependent on the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or loss. As of January 1, 2014, the global drybulk carrier orderbook amounted to 149.6 million dwt, or approximately 20% of the existing fleet at that time, with most vessels on the orderbook expected to be delivered within 24 months. The level of scrapping activity is generally a function of scrapping prices in relation to current and prospective charter market conditions, as well as operating, repair and survey costs. During 2013, a total of 22.2 million dwt or approximately 3.1% of the existing fleet at the end of this year was scrapped, representing the third highest level in the history of the drybulk industry. Generally, drybulk carriers at or over 25 years old are considered to be scrapping candidate vessels.

Charterhire Rates

Charterhire rates paid for drybulk carriers are primarily a function of the underlying balance between vessel supply and demand, although at times other factors may play a role. Furthermore, the pattern seen in charter rates is broadly mirrored across the different charter types and between the different drybulk carrier categories. However, because demand for larger drybulk carriers is affected by the volume and pattern of trade in a relatively small number of commodities, charterhire rates (and vessel values) of larger ships tend to be more volatile than those for smaller vessels.

In the time charter market, rates vary depending on the length of the charter period and vessel specific factors such as age, speed and fuel consumption. In the voyage charter market, rates are influenced by cargo size, commodity, port dues and canal transit fees, as well as delivery and redelivery regions. In general, a larger cargo size is quoted at a lower rate per ton than a smaller cargo size. Routes with costly ports or canals generally command higher rates than routes with low port dues and no canals to transit.

Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region with ports where vessels load cargo also are generally quoted at lower rates, because such voyages generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the calculation of the return charter to a loading area.

Within the drybulk shipping industry, the charterhire rate references most likely to be monitored are the freight rate indices issued by the Baltic Exchange, such as BDI. These references are based on actual charterhire rates under charter entered into by market participants, as well as daily assessments provided to the Baltic Exchange by a panel of major shipbrokers. The Baltic Panamax Index is the index with the longest history. The Baltic Capesize Index and Baltic Handymax Index are of more recent origin.

The drybulk shipping industry is cyclical with attendant volatility in charterhire rates and profitability. The degree of charterhire rate volatility among different types of drybulk carriers varies widely, however, the abrupt and dramatic downturn in the drybulk charter market has severely affected the entire drybulk shipping industry. The Baltic Dry Index, an index published by The Baltic Exchange of shipping rates for 20 key drybulk routes, fell 94% from a peak of 11,793 in May 2008 to a low of 663 in December 2008 and remained volatile during 2009, reaching a low of 772 on January 5, 2009 and a high of 4,661 on November 19, 2009. The BDI continued its volatility in 2010, increasing from 3,235 in January 2010 to a high of 4,209 in May 2010 before subsequently decreasing to a low of 1,700 in July 2010. Following a short period of increase in the third quarter of 2010, the BDI fell to near July 2010 levels by the end of 2010. The BDI further decreased in 2011 to 1,043 in February 2011 and has continued to decline in the beginning of 2012 to 753. During 2012, the BDI increased to a high of 1,165 as of May 8, 2012. During 2013, the BDI was at its lowest level of 698 on January 1, 2013, while it has reach its highest level of 2,337 on December 12, 2013, following a broader upward trend since early of August 2013. As of December 31, 2013, the BDI stood at 2,277, while on March 20, 2014, the index closed at 1,621.

Vessel Prices

Newbuilding prices are determined by a number of factors, including the underlying balance between shipyard output and capacity, raw material and labor costs, freight markets and sometimes exchange rates. In the last few years high levels of new ordering were recorded across all sectors of shipping with the total orderbook reaching approximately 78% of the fleet during the period between August and November of 2008. As a result, most of the major shipyards in Japan, South Korea and China had no available capacity for two forthcoming years, and consequently there was an increased number of orders placed at second and third tier yards mostly in China. The downturn in freight rates, the lack of funding due to the wider global financial crisis, as well as the fact that many yards had limited or no shipbuilding experience has led to a substantial number of these orders being cancelled or delayed. During 2013, new vessels of 62.1 million dwt in aggregate capacity were delivered, versus a total amount of 101.2 million dwt scheduled deliveries for this year, implying a slippage/cancellation rate of 38.6%, substantially higher than the average ratio of 30.6% during the years 2008 through 2012. It is expected that this trend will continue to persist in the future, albeit at a lower degree.

Newbuilding prices have increased significantly since 2003, due to tightness in shipyard capacity, high steel prices, rising labor cost, high levels of new ordering and stronger freight rates. However, with the sudden and steep decline in freight rates after August 2008 and lack of new vessel ordering, newbuilding vessel values entered a downward trend and have continued to gradually decline. This trend however was reversed in the later part of the second half of 2013, as the precipitous increase in freight rates has led to a substantial amount of new orders being placed to the majority of top shipyards in Japan, Korea and China wiping out their available capacity for 2014 and shifting the pricing power from buyers to shipbuilders.

Broadly speaking, the secondhand market is affected by both the newbuilding prices as well as the overall freight expectations and sentiment observed at any given time. The steep increase in newbuilding prices and the strength of the charter market have also affected values, to the extent that prices rose sharply in 2004 and 2005, before dipping in the early part of 2006, only to rise thereafter to new highs in the first half of 2008. However, the sudden and sharp downturn in freight rates since August 2008 has also had a very negative impact on secondhand values. Currently newbuilding and secondhand values have recovered from the well below the lows reached during 2008 through 2012, although they still remain below historical mean levels.

Environmental and Other Regulations in the Drybulk Shipping Industry

Government regulation and laws significantly affect the ownership and operation of our fleet. We are subject to international conventions and treaties, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage, handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources. Compliance with such laws, regulations and other requirements may entail significant expense, including vessel modifications and implementation of certain operating procedures.

A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the United States Coast Guard, harbor master or equivalent), classification societies; flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or temporarily suspend the operation of one or more of our vessels.

We believe that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations are frequently changed and may impose increasingly stricter requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that causes significant adverse environmental impact, such as the 2010 BP plc Deepwater Horizon oil spill in the Gulf of Mexico, could result in additional legislation or regulations that could negatively affect our profitability.

International Maritime Organization

The International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by ships, or the IMO, has adopted the International Convention for the Prevention of Marine Pollution from Ships, 1973, as modified by the related Protocol of 1978 relating thereto, which has been updated through various amendments (collectively, "MARPOL"). MARPOL entered into force on October 2, 1983. It has been adopted by over 150 nations, including many of the jurisdictions in which our vessels operate.

MARPOL is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to harmful substances carried, in bulk, in liquid or packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997.

Air Emissions

In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution. Effective May 2005, Annex VI sets limits on nitrogen oxide emissions from ships whose diesel engines were constructed (or underwent major conversions) on or after January 1, 2000. It also prohibits "deliberate emissions" of "ozone depleting substances," defined to include certain halons and chlorofluorocarbons. "Deliberate emissions" are not limited to times when the ship is at sea; they can for example include discharges occurring in the course of the ship's repair and maintenance. Emissions of "volatile organic compounds" from certain tankers, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls (PCBs)) are also prohibited. Annex VI also includes a global cap on the sulfur content of fuel oil (see below).

The IMO's Maritime Environment Protection Committee, or MEPC, amendments to Annex VI entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulphur contained in any fuel oil used on board ships. As of January 1, 2012, the amended Annex VI requires that fuel oil contain no more than 3.50% sulfur (from the previous cap of 4.50%). By January 1, 2020, sulfur content must not exceed 0.50%, subject to a feasibility review to be completed no later than 2018.

Sulfur content standards are even stricter within certain "Emission Control Areas" ("ECAs"). By July 1, 2010, ships operating within an ECA were not permitted to use fuel with sulfur content in excess of 1.0% (from 1.50%), which will be further reduced to 0.10% on January 1, 2015. Amended Annex VI establishes procedures for designating new ECAs. The Baltic Sea and the North Sea have been so designated. Effective August 1, 2012, certain coastal areas of North America were designated ECAs, and effective January 1, 2014 the United States Caribbean Sea was designated an ECA. If other ECAs are approved by the IMO or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the EPA or the states where we operate, compliance with these regulations could entail significant capital expenditures, operational changes, or otherwise increase the costs of our operations.

As of January 1, 2013 MARPOL made mandatory certain measures relating to energy efficiency for ships. This included the requirement that all new ships utilize the Energy Efficiency Design Index (EEDI) and all ships use the Ship Energy Management Plan (SEEMP).

Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation. The U.S. Environmental Protection Agency promulgated equivalent (and in some senses stricter) emissions standards in late 2009.

We believe that all our vessels are currently compliant in all material respects with these regulations. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.

Safety Management System Requirements

The IMO has also adopted the International Convention for the Safety of Life at Sea, or SOLAS and the International Convention on Load Lines, or the LL Convention, which impose a variety of standards that regulate the design and operational features of ships. The IMO periodically revises the SOLAS and LL Convention standards. May 2012 SOLAS amendments entered in force as of January 1, 2014. The Convention on Limitation of Liability for Maritime Claims (LLMC) was recently amended and the amendments are expected to go into effect on June 8, 2015. The amendments alter the limits of liability for loss of life or personal injury claims and property claims against ship owners. We believe that all our vessels are in substantial compliance with SOLAS and LL Convention standards.

Under Chapter IX of SOLAS, the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or ISM Code, our operations are also subject to environmental standards and requirements. The ISM Code requires the owner of a vessel, or any person who has taken responsibility for operation of a vessel, to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that we and our technical manager have developed for compliance with the ISM Code. The failure of a ship owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.

The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel's management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by classification societies under the authority of each flag state, under the ISM Code. Starbulk S.A. has obtained documents of compliance for their offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The document of compliance, or the DOC, and safety management certificate, or the SMC, are renewed every five years, but the DOC is subject to audit verification annually and the SMC at least every 2.5 years. As of the date of this filing, each of our vessels is ISM code-certified.

Pollution Control and Liability Requirements

The IMO has negotiated international conventions that impose liability for oil pollution in international waters and the territorial waters of the signatory to such conventions. For example, IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments, or the BWM Convention, in February 2004. The BWM Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits. The BWM Convention will not become effective until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world's merchant shipping. To date, there has not been sufficient adoption of this standard for it to take force. Many of the implementation dates originally written in the BWM Convention have already passed, so that once the BWM Convention enters into force, the period for installation of mandatory ballast water exchange requirements would be extremely short, with several thousand ships a year needing to install ballast water management systems (BWMS). For this reason, on December 4, 2013, the IMO Assembly passed a resolution revising the application dates of BWM Convention so that they are triggered by the entry into force date and not the dates originally in the BWM Convention. This in effect makes all vessels constructed before the entry into force date 'existing' vessels, and allows for the installation of a BWMS on such vessels at the first renewal survey following entry into force. Once mid-ocean ballast exchange or ballast water treatment requirements become mandatory, the cost of compliance could increase for ocean carriers. Although we do not believe that the costs of such compliance would be material, it is difficult to predict the overall impact of such a requirement on our operations.

Many countries have ratified and follow the liability plan adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended by different Protocol in 1976, 1984, and 1992, and amended in 2000, or the CLC. Under the CLC and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel's registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions. The 1992 Protocol changed certain limits on liability, expressed using the International Monetary Fund currency unit of Special Drawing Rights. The limits on liability have since been amended so that the compensation limits on liability were raised. The right to limit liability is forfeited under the CLC where the spill is caused by the ship owner's personal fault and under the 1992 Protocol where the spill is caused by the ship owner's personal act or omission by intentional or reckless act or omission where the ship owner knew pollution damage would probably result. The CLC requires ships covered by it to maintain insurance covering the liability of the owner in a sum equivalent to an owner's liability for a single incident. We believe that our protection and indemnity insurance will cover the liability under the plan adopted by the IMO.

The IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, to impose strict liability on ship owners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship's bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.

IMO regulations also require owners and operators of vessels to adopt shipboard oil pollution emergency plans and/or shipboard marine pollution emergency plans for noxious liquid substances in accordance with the guidelines developed by the IMO.

Compliance Enforcement

The flag state, as defined by the United Nations Convention on Law of the Sea, has overall responsibility for implementing and enforcing a broad range of international maritime regulations with respect to all ships granted the right to fly its flag. The "Shipping Industry Guidelines on Flag State Performance" evaluates and reports on flag states based on factors such as sufficiency of infrastructure, ratification, implementation, and enforcement of principal international maritime treaties and regulations, supervision of statutory ship surveys, casualty investigations and participation at IMO and ILO meetings. All of our vessels are flagged in the Marshall Islands. Marshall Islands flagged vessels have historically received a good assessment in the shipping industry. We recognize the importance of a credible flag state and do not intend to use flags of convenience or flag states with poor performance indicators. Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The U.S. Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code by the applicable deadlines will be prohibited from trading in U.S. and European Union ports, respectively. As of the date of this report, each of our vessels is ISM Code certified. However, there can be no assurance that such certificate will be maintained.

The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.

The U.S. Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act

The U.S. Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all "owners and operators" whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States' territorial sea and its 200 nautical mile exclusive economic zone. The United States has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, whether on land or at sea. OPA and CERCLA both define "owner and operator" in the case of a vessel as any person owning, operating or chartering by demise, the vessel. Although OPA is primarily directed at oil tankers (which are not operated by us), it also applies to non-tanker ships with respect to the fuel oil, or bunkers, used to power such ships. CERCLA also applies to our operations.

Under OPA, vessel owners and operators are "responsible parties" and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels. OPA defines these other damages broadly to include:

·	injury to, destruction or loss of, or loss of use of, natural resources and the costs of assessment thereof;

·	injury to, or economic losses resulting from, the destruction of real and personal property;

·	net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;

·	loss of subsistence use of natural resources that are injured, destroyed or lost;

·	lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources;

·	net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards.

OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective July 31, 2009, the U.S. Coast Guard adjusted the limits of OPA liability for non-tank vessels to the greater of $1,000 per gross ton or $854,400 (subject to periodic adjustment for inflation). These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party's gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident where the responsibility party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.

The 2010 Deepwater Horizon oil spill in the Gulf of Mexico may also result in additional regulatory initiatives or statutes, including the raising of liability caps under OPA. For example, on August 15, 2012, the U.S. Bureau of Safety and Economic Enforcement (BSEE) issued a final drilling safety rule for offshore oil and gas operations that strengthens the requirements for safety equipment, well control systems, and blowout prevention practices. The Final Rule took effect on October 22, 2012.

CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damage for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.

OPA and CERCLA both require owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We plan to comply with the U.S. Coast Guard's financial responsibility regulations by providing a certificate of responsibility evidencing sufficient self-insurance.

We currently maintain pollution liability coverage insurance in the amount of $1.0 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage it could have an adverse effect on our business and results of operation.

OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA. Some states have enacted legislation providing for unlimited liability for oil spills. In some cases, states, which have enacted such legislation, have not yet issued implementing regulations defining vessels owners' responsibilities under these laws. We intend to comply with all applicable state regulations in the ports where our vessels call. We believe that we are in substantial compliance with all applicable existing state requirements. In addition, we intend to comply with all future applicable state regulations in the ports where our vessels call.

Other Environmental Initiatives

The U.S. Clean Water Act, or CWA, prohibits the discharge of oil or hazardous substances in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. In addition, many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law.

The U.S. Environmental Protection Agency, or the EPA, regulates the discharge of ballast and bilge water and other substances in U.S. waters under the CWA. EPA regulations require vessels 79 feet in length or longer (other than commercial fishing and recreational vessels) to comply with a Vessel General Permit authorizing ballast water discharges and other discharges incidental to the operation of vessels. The Vessel General Permit, or the VGP, imposes technology and water-quality based effluent limits for certain types of discharges and establishes specific inspection, monitoring, record keeping and reporting requirements to ensure the effluent limits are met. The EPA replaced the current VGP with a new VGP, effective December 19, 2013. The new VGP also contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in US waters, more stringent requirements for exhaust gas scrubbers and requires the use of environmentally acceptable lubricants. U.S. Coast Guard regulations adopted under the U.S. National Invasive Species Act, or NISA, also impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering or operating in U.S. waters, and the Coast Guard, as of June 21, 2012, adopted revised ballast water management requirements that established standards for allowable concentrations of living organisms in ballast water discharged from ships in U.S. waters. The Coast Guard's revised ballast water standards are consistent with requirements under the 2004 BWM Convention. Compliance with the EPA and the U.S. Coast Guard regulations could require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters.

The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, or the CAA, requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. Our vessels that operate in such port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these requirements. The CAA also requires states to draft State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. As indicated above, our vessels operating in covered port areas are already equipped with vapor recovery systems that satisfy these existing requirements.

However, compliance with future EPA and U.S. Coast Guard regulations could require the installation of certain engineering equipment and water treatment systems to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters.

European Union Regulations

In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. Member States were required to enact laws or regulations to comply with the directive by the end of 2010. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the ship is in danger.

Greenhouse Gas Regulation

Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions. As of January 1, 2013 all new ships must comply with two new sets of mandatory requirements, which were adopted by MEPC in July 2011 to address greenhouse gas emission from ships. Currently, operating ships are required to develop SEEMPs, and minimum energy efficiency levels per capacity mile applies to new ships. These requirements could cause us to incur additional compliance costs. The IMO is planning to implement market-based mechanisms to reduce greenhouse gas emissions from ships at an upcoming MEPC session. The European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to include emissions of greenhouse gases from marine vessels. In the United States, the EPA has issued a finding that greenhouse gases endanger the public health and safety and has adopted regulations to limit greenhouse gas emissions from certain mobile sources and large stationary sources. Although the mobile source emissions regulations do not apply to greenhouse gas emissions from vessels, the EPA is considering a petition from the California Attorney General and environmental groups to regulate greenhouse gas emissions from ocean-going vessels. Any passage of climate control legislation or other regulatory initiatives by the IMO, European Union, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol, that restrict emissions of greenhouse gases could require us to make significant financial expenditures, including capital expenditures to upgrade our vessels, which we cannot predict with certainty at this time.

International Labour Organization

The International Labour Organization (ILO) is a specialized agency of the UN with headquarters in Geneva, Switzerland. The ILO has adopted the Maritime Labor Convention 2006 (MLC 2006). A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance will be required to ensure compliance with the MLC 2006 for all ships above 500 gross tons in international trade. The MLC 2006 entered into force on August 20, 2013. The MLC 2006 requires us to develop new procedures to ensure full compliance with its requirements.

Vessel Security Regulations

Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the U.S. Maritime Transportation Security Act of 2002, or the MTSA, came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. The regulations also impose requirements on certain ports and facilities, some of which are regulated by the EPA.

Similarly, in December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new Chapter V became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, and mandates compliance with the International Ship and Port Facility Security Code, or the ISPS Code. The ISPS Code is designed to enhance the security of ports and ships against terrorism. After July 1, 2004, to trade internationally, a vessel must attain an International Ship Security Certificate, or ISSC, from a recognized security organization approved by the vessel's flag state. Among the various requirements are:

·	on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship's identity, position, course, speed and navigational status;

·	on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore;

·	the development of a ship security plan;

·	ship identification number to be permanently marked on a vessel's hull;

a continuous synopsis record kept onboard showing a vessel's history including the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and

·	compliance with flag state security certification requirements.

Vessels operating without a valid certificate may be detained at port until it obtains an ISSC, or it may be expelled from port, or refused entry at port.

The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt from MTSA vessel security measures non-U.S. vessels provided such vessels have on board a valid ISSC that attests to the vessel's compliance with SOLAS security requirements and the ISPS Code. Our managers intend to implement the various security measures addressed by MTSA, SOLAS and the ISPS Code, and we intend that our fleet will comply with applicable security requirements. We have implemented the various security measures addressed by the MTSA, SOLAS and the ISPS Code.

Inspection by Classification Societies

Every oceangoing vessel must be "classed" by a classification society. The classification society certifies that the vessel is "in class", signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel's country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.

For maintenance of the class certification, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any special equipment classed are required to be performed as follows:

Annual Surveys. For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant and where applicable for special equipment classed, within three months before or after each anniversary date of the date of commencement of the class period indicated in the certificate.

Intermediate Surveys. Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years after commissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second or third annual survey.

Class Renewal Surveys. Class renewal surveys, also known as special surveys, are carried out for the ship's hull, machinery, including the electrical plant, and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey the vessel is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of money may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a ship owner has the option of arranging with the classification society for the vessel's hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle. Upon a ship owner's request, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal.

All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years. Vessels under five years of age can waive drydocking in order to increase available days and decrease capital expenditures, provided the vessel is inspected underwater.

Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as "in class" by a classification society which is a member of the International Association of Classification Societies (the IACS). All our vessels are certified as being "in class" by RINA, ABS and NKK, major classification societies which are member of IACS. All new and secondhand vessels that we purchase must be certified prior to their delivery under our standard purchase contracts and memorandum of agreement. If the vessel is not certified on the date of closing, we have no obligation to take delivery of the vessel.

Risk of Loss and Liability Insurance

The operation of any drybulk vessel includes risks such as mechanical and structural failure, hull damage, collision, property loss, cargo, loss or damage and business interruption due to political circumstances in foreign countries, piracy, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental incidents, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon owners, operators and demise charterers of vessels trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for ship owners and operators trading in the United States market.

We maintain hull and machinery insurance, war risks insurance, protection and indemnity cover, and freight, demurrage and defense cover for our fleet in amounts that we believe to be prudent to cover normal risks in our operations. However, we may not be able to achieve or maintain this level of coverage throughout a vessel's useful life. Furthermore, while we believe that the insurance coverage that we will obtain is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.

Hull & Machinery and War Risks Insurance

We maintain marine hull and machinery and war risks insurance, which include the risk of actual or constructive total loss, for all of our vessels. Our vessels are each covered up to at least fair market value with deductibles of $100,000—$150,000 per vessel per incident. We also maintain increased value coverage for most of our vessels. Under this increased value coverage, in the event of total loss of a vessel, we will be able to recover the sum insured under the increased value policy in addition to the sum insured under the hull and machinery policy. Increased value insurance also covers excess liabilities which are not recoverable under our hull and machinery policy by reason of under insurance.

Protection and Indemnity Insurance

Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I Associations, which insure liabilities to third parties in connection with our shipping activities. This includes third-party liability and other related expenses resulting from the injury or death of crew, passengers and other third parties, the loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal. Our P&I coverage is subject to and in accordance with the rules of the P&I Association in which the vessel is entered. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or "clubs." Our coverage is limited to approximately $6.5 billion, except for pollution which is limited $1 billion and passenger and crew which is limited to $3 billion.

Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. The thirteen P&I Associations that comprise the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. Each P&I Association has capped its exposure to this pooling agreement at $6.5 billion. As a member of a P&I Association which is a member of the International Group, we are subject to calls payable to the associations based on the group's claim records as well as the claim records of all other members of the individual associations and members of the pool of P&I Associations comprising the International Group.

Permits and Authorizations

We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our vessels. The kinds of permits, licenses and certificates required depend upon several factors, including the commodity transported, the waters in which the vessel operates, the nationality of the vessel's crew and the age of a vessel. We have been able to obtain all permits, licenses and certificates currently required to permit our vessels to operate. Additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of us doing business.

C.	Organizational structure

As of December 31, 2013, we are the sole owner of all of the outstanding shares of the subsidiaries listed in Note 1 of our consolidated financial statements under Item 18. "Financial Statements."

D.	Property, plant and equipment

We do not own any real property. Our interests in the vessels in our fleet are our only material properties. See Item 4. "Information on the Company—Our Fleet."

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

Overview

The following management's discussion and analysis of financial condition and results of operations should be read in conjunction with "Item 3. Key Information – Selected Financial Data", "Item 4. Information on the Company" and our historical consolidated financial statements and accompanying notes included elsewhere in this report. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in the section entitled "Risk Factors" and elsewhere in this report.

We are an international company providing worldwide transportation solutions in the drybulk sector through our vessels-owning subsidiaries for a broad range of customers of major and minor bulk cargoes including iron ore, coal, grain, cement, and fertilizer, along worldwide shipping routes.

A.	Operating Results

Factors Affecting Our Results of Operations

We currently employ six of our vessels on medium to long-term time charters with an average remaining term of approximately 1.23 years, ten of our vessels on short-term time charters and one of our vessels under its periodic dry-docking survey. Under our time charters, the charterer typically pays us a fixed daily charterhire rate and bears all voyage expenses, including the cost of bunkers (fuel oil) and port and canal charges. We remain responsible for paying the chartered vessel's operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, and we also pay commissions to affiliated and unaffiliated ship brokers and to in-house brokers associated with the charterer for the arrangement of the relevant charter. In addition, we are also responsible for the drydocking costs related to our vessels. During 2014, six vessels are scheduled to undergo their routine drydocking surveys.

Although six of our vessels in our fleet are employed on medium- to long-term time charters ranging from four months to three years, we may employ these and our other vessels under COAs, bareboat charters, in the spot market or in drybulk carrier pools in the future.

We believe that the important measures for analyzing trends in the results of operations consist of the following:

·	Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in that period.

·	Ownership days are the total calendar days each vessel in the fleet was owned by us for the relevant period.

·	Available days for the fleet are the ownership days after subtracting for off-hire days as a result of major repairs, dry-docking or special or intermediate surveys.

·	Voyage days are the total days the vessels were in our possession for the relevant period after subtracting all off-hire days incurred for any reason (including off-hire for major repairs, drydocking or special or intermediate surveys).

·	Fleet utilization is calculated by dividing voyage days by available days for the relevant period.

Time charter equivalent rate. Our method of calculating TCE rate is determined by dividing voyage revenues (net of Voyage expenses and amortization of fair value of above/below market acquired time charter agreements) by voyage days for the relevant time period. The following table reflects our voyage days, ownership days, fleet utilization and TCE rates for the periods indicated:

(TCE rates expressed in U.S. dollars)	Year Ended December 31, 2011	Year Ended December 31, 2012	Year Ended December 31, 2013
Average number of vessels	12.26	14.19	13.34
Number of vessels in operation (as of the last day of the periods reported)	15	14	15
Average age of operational fleet (in years)	10.6	10.8	9.6
Ownership days	4,475	5,192	4,868
Available days	4,377	4,879	4,763
Voyage days for fleet	4,336	4,699	4,651
Fleet Utilization	99%	96%	98%
Time charter equivalent rate	$ 19,989	$15,419	$14,427
Voyage Revenues	106,912	85,684	68,296

Time Charter Equivalent (TCE)

Time charter equivalent rate, or TCE rate, is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE rate is determined by dividing voyage revenues (net of Voyage expenses and amortization of fair value of above/below market acquired time charter agreements) by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, as well as commissions. TCE rate is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods because charterhire rates for vessels on voyage charters are generally not expressed in per-day amounts while charterhire rates for vessels on time charters generally are expressed in such amounts. We included below TCE revenues, a non-GAAP measure, as we believe it provides additional meaningful information in conjunction with voyage revenues, the most directly comparable U.S. GAAP measure, because it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance. Investors also consider TCE rate in order to compare our Company's earnings performance with our peer group of companies. Our calculation of TCE may not be comparable to that reported by other companies.

The following table reflects the calculation of our TCE rates and reconciliation of TCE revenue to voyage revenue as reflected in the consolidated statement of operations:

(In thousands of U.S. Dollars, except as otherwise stated)	Year Ended December 31, 2011			Year Ended December 31, 2012			Year Ended December 31, 2013
Voyage revenues		106,912			85,684			68,296
Less:
Voyage expenses		(22,429	)		(19,598	)		(7,549	)
Amortization of fair value of below/above market acquired time charter agreements		2,187			6,369			6,352
Time Charter equivalent revenues		86,670			72,455			67,099

Voyage days for fleet		4,336			4,699			4,651
Time charter equivalent (TCE) rate (in U.S. Dollars)		19,989			15,419			14,427

Voyage Revenues

Voyage revenues are driven primarily by the number of vessels in our fleet, the number of voyage days during which our vessels generate revenues and the amount of daily charterhire, or time charter equivalent, that our vessels earn under period charters, which, in turn, are affected by a number of factors, including our decisions relating to vessel acquisitions and disposals, the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in drydock undergoing repairs, maintenance and upgrade work, the age, condition and specifications of our vessels, levels of supply and demand in the seaborne transportation market and other factors affecting spot market charter rates for drybulk carriers.

Vessels operating on time charters for a certain period of time provide more predictable cash flows over that period of time, but can yield lower profit margins than vessels operating in the spot charter market during periods characterized by favorable market conditions. Vessels operating in the spot charter market generate revenues that are less predictable but may enable us to capture increased profit margins during periods of improvements in charter rates although we would be exposed to the risk of declining vessel rates, which may have a materially adverse impact on our financial performance. If we employ vessels on period time charters, future spot market rates may be higher or lower than the rates at which we have employed our vessels on period time charters.

Vessel Voyage Expenses

Voyage expenses include hire paid for chartered-in vessels, port and canal charges, fuel (bunker) expenses and brokerage commissions payable to related and third parties.

Vessel Operating Expenses

Vessel operating expenses include crew wages and related costs, the cost of insurance and vessel registry, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes, regulatory fees, technical management fees and other miscellaneous expenses. Other factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market prices for crew wages and insurance, may also cause these expenses to increase. Technical vessel managers established an operating expense budget for each vessel and perform the day-to-day management of the vessels. Star Bulk Management monitors the performance of each of the technical vessel managers by comparing actual vessel operating expenses with the operating expenses budget for each vessel. We are responsible for the costs of any deviations from the budgeted amounts.

Depreciation

We depreciate our vessels on a straight-line basis over their estimated useful lives determined to be 25 years from the date of their initial delivery from the shipyard. Depreciation is calculated based on a vessel's cost less the estimated residual value.

General and administrative Expenses

We incur General and administrative expenses, including our onshore personnel related expenses, legal and accounting expenses.

Interest and Finance Costs

We incur interest expenses and financing costs in connection with vessel-specific debt relating to the acquisition of our vessels. We defer financing fees and expenses incurred upon entering into our credit facility and amortize them to interest and financing costs over the term of the underlying obligation using the effective interest method.

Interest income

We earn interest income on our cash deposits with our lenders.

Inflation

Inflation does not have a material effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, administrative and financing costs.

Foreign Exchange Fluctuations

Please see Item 11. "Quantitative and Qualitative Disclosures about Market Risk."

Special or Intermediate Survey and Drydocking Costs

We utilize the direct expense method, under which we expense all drydocking costs as incurred.

Lack of Historical Operating Data for Vessels before Their Acquisition by Us

Consistent with shipping industry practice, other than inspection of the physical condition of the vessels and examinations of classification society records, there is no historical financial due diligence process when we acquire vessels. Accordingly, we do not obtain the historical operating data for the vessels from the sellers because that information is not material to our decision to make vessel acquisitions, nor do we believe it would be helpful to potential investors in our stock in assessing our business or profitability. Most vessels are sold under a standardized agreement, which, among other things, provides the buyer with the right to inspect the vessel and the vessel's classification society records. The standard agreement does not give the buyer the right to inspect, or receive copies of, the historical operating data of the vessel. Prior to the delivery of a purchased vessel, the seller typically removes from the vessel all records, including past financial records and accounts related to the vessel. In addition, the technical management agreement between the seller's technical manager and the seller is automatically terminated and the vessel's trading certificates are revoked by its flag state following a change in ownership.

Consistent with shipping industry practice, we treat the acquisition of a vessel (whether acquired with or without charter) as the acquisition of an asset rather than a business, which we believe to be in accordance with applicable U.S. GAAP and Commission rules. Where a vessel has been under a voyage charter, the vessel is delivered to the buyer free of charter, and it is rare in the shipping industry for the last charterer of the vessel in the hands of the seller to continue as the first charterer of the vessel in the hands of the buyer. In most cases, when a vessel is under time charter and the buyer wishes to assume that charter, the vessel cannot be acquired without the charterer's consent and the buyer entering into a separate direct agreement (called a "novation agreement") with the charterer to assume the charter. The purchase of a vessel itself does not transfer the charter because it is a separate service agreement between the vessel owner and the charterer.

Where we identify any intangible assets or liabilities associated with the acquisition of a vessel, we allocate the purchase price of acquired tangible and intangible assets based on their relative fair values. Where we have assumed an existing charter obligation or entered into a time charter with the existing charterer in connection with the purchase of a vessel with the time charter agreement at charter rates that are less than market charter rates, we record a liability, based on the difference between the assumed charter agreement rate and the market charter rate for an equivalent charter agreement. Conversely, where we assume an existing charter obligation or enter into a time charter with the existing charterer in connection with the purchase of a vessel with the charter agreement at charter rates that are above prevailing market charter rates, we record an asset, based on the difference between the market charter rate and the assumed contracted charter rate for an equivalent vessel. This determination is made at the time the vessel is delivered to us, and such assets and liabilities are amortized to revenue over the remaining period of the charter.

When we purchase a vessel and assume or renegotiate a related time charter, we must take the following steps before the vessel will be ready to commence operations:

·	obtain the charterer's consent to us as the new owner;

·	obtain the charterer's consent to a new technical manager;

·	in some cases, obtain the charterer's consent to a new flag for the vessel;

·	arrange for a new crew for the vessel, and where the vessel is on charter, in some cases, the crew must be approved by the charterer;

·	replace all hired equipment on board, such as gas cylinders and communication equipment;

·	negotiate and enter into new insurance contracts for the vessel through our own insurance brokers;

·	register the vessel under a flag state and perform the related inspections in order to obtain new trading certificates from the flag state;

·	implement a new planned maintenance program for the vessel; and

·	ensure that the new technical manager obtains new certificates for compliance with the safety and vessel security regulations of the flag state.

The following discussion is intended to help you understand how acquisitions of vessels affect our business and results of operations.

Our business is comprised of the following main elements:

·	employment and operation of our drybulk vessels; and

·	management of the financial, general and administrative elements involved in the conduct of our business and ownership of our drybulk vessels.

The employment and operation of our vessels require the following main components:

·	vessel maintenance and repair;

·	crew selection and training;

·	vessel spares and stores supply;

·	contingency response planning;

·	onboard safety procedures auditing;

·	accounting;

·	vessel insurance arrangement;

·	vessel chartering;

·	vessel security training and security response plans (ISPS);

·	obtaining ISM certification and audits for each vessel within the six months of taking over a vessel;

·	vessel hire management;

·	vessel surveying; and

·	vessel performance monitoring.

The management of financial, general and administrative elements involved in the conduct of our business and ownership of our vessels requires the following main components:

·	management of our financial resources, including banking relationships (i.e., administration of bank loans and bank accounts);

·	management of our accounting system and records and financial reporting;

·	administration of the legal and regulatory requirements affecting our business and assets; and

·	management of the relationships with our service providers and customers.

The principal factors that affect our profitability, cash flows and shareholders' return on investment include:

·	Charter rates and periods of charterhire;

·	levels of vessel operating expenses;

·	depreciation and amortization expenses;

·	financing costs; and

·	fluctuations in foreign exchange rates.

Critical Accounting Policies

We make certain estimates and judgments in connection with the preparation of our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are the most critical accounting policies that involve a high degree of judgment and the methods of their application. For a description of all of our significant accounting policies, see Note 2 (Significant Accounting Policies) to our Financial Statements included herein for more information.

Impairment of long-lived assets: We follow guidance related to Impairment or Disposal of Long-lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The standard requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying amount, we should evaluate the asset for an impairment loss. The impairment loss is determined by the difference between the carrying amount of the asset and the fair value of the asset. In this respect, management regularly reviews the carrying amount of the vessels on vessel by vessel basis when events and circumstances indicate that the carrying amount of the vessels might not be recoverable.

As of December 31, 2011 and as of September 30, 2012, we performed an impairment review of our vessels due to the global economic downturn and the prevailing conditions in the shipping industry. We compared undiscounted cash flows to the carrying values for our vessels to determine if the carrying values of the assets were recoverable. The undiscounted projected net operating cash flows for each vessel are determined by considering the charter revenues from existing time charters for the fixed vessel days and an estimated daily time charter equivalent for the unfixed days over the remaining estimated life of the vessel, assuming a fleet utilization of 98%, net of brokerage commissions, expected outflows for vessel's maintenance and vessel operating expenses. Estimates of daily time charter equivalent for the unfixed days are based on the current Forward Freight Agreement, ("FFA"), rates, for as long as they are available and historical average rates for the period thereafter. Our management's subjective judgment is required in making assumptions that are used in forecasting future operating results used in this method. Such judgment is based on historical trends as well as future expectations regarding future charter rates, vessel operating expenses and fleet utilization that were applied over the remaining useful life of the vessel, which is assumed to be 25 years from the delivery of the vessel from the shipyard. Expected expenditures for scheduled vessels' maintenance and vessels' operating expenses are based on our budgeted figures and adjusted annually for inflation rate of 2% for the year 2011 and of 3% for the year 2012. The estimated salvage value of the vessels is $200 per light weight ton, in accordance with our vessel's depreciation policy. These estimates are consistent with the plans and forecasts used by management to conduct our business. If our estimate of undiscounted future cash flow for any vessel is lower than the vessel's carrying value, the carrying value is written down, by recording a charge to operations, to the vessel's fair market value if the fair market value is lower than the vessel's carrying value.

As a result of this analysis, we determined that the carrying amount of Star Sigma and Star Ypsilon was not recoverable as of December 31, 2011, and an impairment loss of $62.0 million was recognized. This analysis, for each of our vessels as of September 30, 2012, indicated that the carrying amount of the entire supramax fleet and Star Sigma was not recoverable and after comparing the vessel's fair values to their carrying values, an impairment loss amounting to $303.2 million was recognized. Our analysis for the year ended December 31, 2013, indicated that the carrying amount of our vessels was recoverable and therefore we concluded that no impairment loss was necessary.

Vessel Acquisitions and Depreciation: We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and delivery expenditures, including pre-delivery expenses and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation. We depreciate our vessels on a straight-line basis over their estimated useful lives, after considering the estimated salvage value. We estimate the useful life to be 25 years from the date of initial delivery from the shipyard (secondhand vessels are depreciated from the date of their acquisition through their remaining estimated useful life). We estimate the salvage value of our vessels at $200 per light weight ton.

An increase in the useful life of a vessel or in its residual value would have the effect of decreasing the annual depreciation and extending it into later periods. A decrease in the useful life of a vessel or in its residual value would have the effect of increasing the annual depreciation and extending it into later periods.

A decrease in the useful life of the vessel may occur as a result of poor vessel maintenance performed, harsh ocean going and weather conditions the vessel is subjected to, or poor quality of the shipbuilding or yard. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is adjusted to end at the date such regulations preclude such vessel's further commercial use. Weak freight market rates result in owners scrapping more vessels, and scrapping them earlier in their lives due to the unattractive returns. An increase in the useful life of the vessel may occur as a result of superior vessel maintenance performed, favorable ocean going and weather conditions the vessel is subjected to, superior quality of the shipbuilding or yard, or high freight market rates, which result in owners scrapping the vessels later due to the attractive cash flows.

Fair value of above/below market acquired time charter: We value any asset or liability arising from the market value of the time charters assumed when a vessel is acquired. The value of above or below market acquired time charters is determined by comparing existing charter rates in the acquired time charter agreements with the market rates for equivalent time charter agreements prevailing at the time the foregoing vessels are delivered. Such intangible assets or liabilities are recognized ratably as adjustments to revenues over the remaining term of the assumed time charter.

Due to early time charter terminations the remaining unamortized balances of the intangible assets and liabilities associated with such below or above market acquired time charters were recognized as "Gain on time charter agreement termination" or in the accompanying consolidated statements of operations. (Refer to note 8 of our consolidated financial statements).

Equity incentive plan awards: Stock-based compensation represents vested and non-vested restricted shares granted to employees and directors, for their services as directors, and is included in "General and administrative expenses" in the consolidated statements of operations. These shares are measured at their fair value equal to the market value of our common stock on the grant date. The shares that do not contain any future service vesting conditions are considered vested shares and a total fair value of such shares is expensed on the grant date. The shares that contain a time-based service vesting conditions are considered non-vested shares on the grant date and a total fair value of such shares is recognized using the accelerated method.

We currently assume that all non-vested shares will vest. We do not include estimated forfeitures in determining the total stock-based compensation expense because we estimate the forfeitures of non-vested shares to be immaterial and we did not have forfeitures in the past. We will, however, re-evaluate the reasonableness of our assumption at each reporting period. We pay dividends on all issued shares regardless of whether they have vested and there is an obligation of the employee to return the dividend when employment ceases, prior to the date that shares vest. The dividends declared and paid on issued and non -vested shares that are expected to vest are charged to retained earnings.

Trade accounts receivable: The amount shown as trade accounts receivable, at each balance sheet date, includes estimated recoveries from each voyage or time charter net of any provision for doubtful debts. At each balance sheet date, the Company provides for doubtful accounts on the basis of specific identified doubtful receivables.

Results of Operations

Year ended December 31, 2013 compared to the year ended December 31, 2012.

Voyage revenues: Voyage revenues for the years ended December 31, 2013 and 2012, were approximately $68.3 million and $85.7 million, respectively. This decrease is mainly attributable to the following reasons: (i) decreased charter rates in certain of our vessels during the year ended December 31, 2013, compared to year ended December 31, 2012; and (ii) the fact that the average number of vessels that operated during the year ended December 31, 2013, decreased to 13.34 compared to 14.19, during the year ended December 31, 2012. During the year ended December 31, 2013, we earned $14,427 TCE rate per day as compared to $15,419 TCE rate per day for the year ended December 31, 2012, due to the decrease in prevailing charter rates at which our vessels were chartered. Charterhire rates were volatile in 2012 and 2013 and continue to be volatile.

Management fee income: For the years ended December 31, 2013 and 2012, management fee income was approximately $1.6 million and $0.5 million, respectively. The increase was due to the increase in the average number of third party vessels under management to 5.8 vessels during the year ended December 31, 2013 from 1.7 during the year ended December 31, 2012.

Voyage expenses: For the years ended December 31, 2013 and 2012, Voyage expenses were approximately $7.5 million and $19.6 million, respectively. Consistent with drybulk industry practice, we paid broker commissions ranging from 1.25% to 5.75% of the total daily charterhire rate of each charter to ship brokers associated with the charter, depending on the number of brokers involved with arranging the charter. Voyage expenses also consist of hire paid for chartered-in vessels, port, canal and fuel costs. The decrease in Voyage expenses is attributable to i) an expense for chartering-in third party vessels to serve shipments under the Vale COA, that was completed in February 2012, amounted to $4.1 million and ii) the lower level of spot market activity during the year ended December 31, 2013, which resulted in lower port, canal and fuel costs, compared to the year ended December 31, 2012.

Vessel operating expenses: For the years ended December 31, 2013 and 2012, our vessel operating expenses were approximately $27.1 million and $27.8 million and our daily vessel operating expenses, were approximately $5,564 and $5,361, respectively. Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. The decrease is mainly due to the fact that the average number of vessels that operated during the year ended December 31, 2013, decreased to 13.34 compared to 14.19, during the year ended December 31, 2012.

Drydocking expenses: For the year ended December 31, 2013 and 2012, our drydocking expenses were $3.5 million and $5.7 million, respectively. During both years ended December 31, 2013 and 2012, we had three Supramax vessels and one Capesize vessel that underwent their periodic drydocking surveys. The decrease is attributable mainly to the age of the vessels that underwent their periodic drydocking surveys.

Depreciation: We depreciate our vessels based on a straight line basis over the expected useful life of each vessel, which is 25 years from the date of their initial delivery from the shipyard. Depreciation is based on the cost of the vessel less its estimated residual value, which is estimated at $200 per lwt, at the date of the vessel's acquisition. Secondhand vessels are depreciated from the date of their acquisition through their remaining estimated useful life. For the years ended December 31, 2013 and 2012, we recorded vessel depreciation charge of approximately $16.1 million and $33.0 million, respectively. The decrease in depreciation is attributable to i) impairment losses recognized as of September 31, 2012, in connection to our oldest Capesize vessel, Star Sigma and the entire fleet of our eight Supramax vessels, which resulted in a reduced net book value for the respective vessels and ii). the lower average number of vessels of 13.34, that operated during the year ended December 31, 2013, compared to 14.19, during the year ended December 31, 2012

Loss / (gain) on derivative instruments, net: In June 2013, we entered into two interest rate swap agreements. The valuation of these as of December 31, 2013, resulted into a non-cash gain amounting to $0.1 million. Gain on derivative instruments for the year ended December 31, 2012, amounted to $0.04 million.

General and administrative expenses: For the years ended December 31, 2013 and 2012, we incurred General and administrative expenses of approximately $9.9 million and $9.3 million, respectively. For the year ended December 31, 2013, our General and administrative expenses consist of salaries and other related costs of the executive officers and other employees ($6.2 million), office renovation costs and office rents, legal, accounting costs and consultancy fees, regulatory compliance costs and other miscellaneous expenses ($2.2 million) and costs related to vested and non-vested stock grants under the equity incentive plan ($1.5 million). For the year ended December 31, 2012, our General and administrative expenses consist of salaries and other related costs of the executive officers and other employees ($5.2 million), office renovation costs and office rents, legal, accounting costs and consultancy fees, regulatory compliance costs and other miscellaneous expenses ($2.6 million) and costs related to non-vested stock grants under the equity incentive plan ($1.5 million). The increase in salaries and other related costs of the executive officers and other employees is attributed to higher number of employees during the year ended December 31, 2013 compared to the year ended December 31, 2012, as a result of the growth of our managed fleet.

Vessel impairment loss: The Company tests for impairment of its long lived assets whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Due to the sustained decline in charter rates and vessel values during the last years and because market expectations for future rates were low and unlikely to increase to the high levels of 2008 in the foreseeable future, the Company performed an impairment analysis for all the vessels in its fleet by comparing projected undiscounted cash flows to the carrying values of vessels. As a result of this analysis during the year ended December 31, 2012, we recorded an impairment loss of $303.2 million related to the write down to fair value of the carrying amount of our entire fleet of eight Supramax vessels and of our oldest Capesize vessel Star Sigma. Our analysis for the year ended December 31, 2013, indicated that the carrying amount of our vessels was recoverable and therefore no impairment loss was recorded.

Gain on time charter agreement termination: For the year ended December 31, 2012, we recorded a gain on time charter agreement termination of $6.454 million. Star Sigma was time chartered to Pacific Bulk Shipping Ltd. at a gross daily charter rate of $38,000 per day for the period from March 1, 2009 until October 29, 2013, and was redelivered earlier to us on December 31, 2011. On January 4, 2012, we signed an agreement with the charterer in order to receive an amount of $5.734 million in cash, as compensation for the early redelivery of the respective vessel. The total amount was received in January 2012. In addition to the cash payment, Pacific Bulk supplied us with 1,027 metric tons of fuel, valued at $0.720 million.

Other operational loss: For the year ended December 31, 2013, we recorded a loss of $1.1 million representing the expense incurred by the Company towards a third party, in connection with the settlement of one of the legal cases, that included in the agreement signed in September 2010. Under the specified agreement, we sold to the third party a 45% interest in the future proceeds related to the recovery of certain of the commercial claims against a consideration of $5,000. The expense of $1.1 million was incurred in connection to the settlement amount of $2.5 million described in other operational gain below. For the year ended December 31, 2012, we recorded a loss of $1.2 million representing the expense incurred by the Company towards a third party, in connection with the settlement of one of the legal cases, that included in the above mentioned agreement. The expense of $1.2 million was incurred in connection to the settlement amount of $2.5 million described in other operational gain below.

Other operational gain: For the year ended December 31, 2013, we recognized a gain of $3.8 million comprising of $2.5 million and $0.2 million regarding the settlement of two commercial claims against Ishhar Overseas, previous charterer of Star Epsilon and Star Kappa and Korea Line Corporation, previous charterer of Star Gamma and Star Cosmo, respectively and a gain of $1.0 million regarding a hull & machinery claim. For the year ended December 31, 2012, we recognized a gain of $2.7 million comprising of $2.5 million and $0.2 million regarding the settlement of two commercial claims against Ishhar Overseas, previous charterer of Star Epsilon and Star Kappa and Korea Line Corporation, previous charterer of Star Gamma and Star Cosmo, respectively and a gain of $0.8 million regarding a hull & machinery claim.

Loss on sale of vessel: For the years ended December 31, 2013, we recorded a loss on sale of vessel of $0.1 million related to the sale of Sigma that was concluded in March 2013 and the vessel was delivered to its purchasers on April 10, 2013. For the year ended December 31, 2012, we recorded a loss on sale of vessel of $3.2 million related to the sale of Star Ypsilon that was concluded in February 2012 and the vessel was delivered to its purchasers on March 9, 2012.

Interest and finance cost: For the year ended December 31, 2013 and 2012, our interest and finance costs under our term loan facilities totaled approximately $6.8 million and $7.8 million, respectively. This decrease is mainly due to lower average outstanding debt during 2013 amounting to $200.2 million compared to $241.9 million for 2012, and due to interest capitalized from the general debt in 2013 of $0.6 million, in relation to advances paid for our Newbuiliding Vessels.

Interest and other income: For both years ended December 31, 2013 and 2012, interest income was $0.2 million, respectively.

Year ended December 31, 2012 compared to the year ended December 31, 2011.

Voyage revenues: Voyage revenues for the years ended December 31, 2012 and 2011, were approximately $85.7 million and $106.9 million, respectively. This decrease is mainly due to lower average TCE rates, a non-U.S. GAAP measure representing time charter equivalent daily cash rates earned from chartering of our vessels. During the year ended December 31, 2012, we earned $15,419 TCE rate per day as compared to $19,989 TCE rate per day for the year ended December 31, 2011, due to the decrease in prevailing charter rates at which our vessels were chartered. In addition, for the year ended December 31, 2012, total voyage revenues decreased by $6.4 million due to the amortization of the fair value of above market acquired time charters compared to a decrease of $2.2 million total voyage revenues due to the amortization of the fair value of above/below market acquired time charters for the year ended December 31, 2011. Additional voyage revenues for the year ended December 31, 2012 were negatively affected by the grounding and the main engine damage of Star Polaris, which resulted in an off-hire period of 191 days and a loss of revenue of $3.1 million.

Management fee income: For the years ended December 31, 2012 and 2011, management fee income was approximately $0.5 million and $0.2 million, respectively. The increase was due to the increase in the number of third party vessels under management.

Voyage expenses: For the years ended December 31, 2012 and 2011, Voyage expenses were approximately $19.6 million and $22.4 million, respectively. Consistent with drybulk industry practice, we paid broker commissions ranging from 1.25% to 5.75% of the total daily charterhire rate of each charter to ship brokers associated with the charter, depending on the number of brokers involved with arranging the charter. Voyage expenses also consist of hire paid for chartered-in vessels, port, canal and fuel costs. The expense for chartering-in third party vessels to serve shipments under the Vale COA that was completed in February 2012 amounted to $4.1 million and $18.4 million for the years ended December 31, 2012 and 2011, respectively. Excluding these expenses for chartering-in third party vessels, the increase in Voyage expenses is attributable to the increase in bunker and port charges. Bunker and port charges primarily increase in periods during which vessels are employed on voyage charters because these expenses are for the account of the vessels. During the year ended December 31, 2012, our vessels were under seven voyage charter agreements, while during the year ended December 31, 2011 only one of our vessels was under one voyage charter agreement.

Vessel operating expenses: For the years ended December 31, 2012 and 2011, our vessel operating expenses were approximately $27.8 million and $25.2 million, respectively. Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. The increase is mainly due to the fact that the average number of vessels that operated during the year ended December 31, 2012, increased to 14.2 compared to 12.3, during the year ended December 31, 2011. However, daily operating expenses, which are calculated by dividing operating expenses by ownerships days for the relevant period, decreased to $5,361 during the year ended December 31, 2012 compared to $5,642 for the year ended December 31, 2011, despite the increase in the average size of the vessels in our fleet by 16%. This decrease is mainly attributable to our efforts to further improve our operational efficiency.

Drydocking expenses: For the year ended December 31, 2012 and 2011, our drydocking expenses were $5.7 million and $3.1 million, respectively. The increase is mainly due to the fact that in 2012, we had three Supramax vessels and one Capesize vessel that underwent their periodic drydocking surveys, while in 2011 we had four Supramax vessels that underwent their periodic drydocking surveys, excluding Star Big which underwent drydocking the same day that the vessel was delivered to us and the respective expenses were capitalized.

Depreciation: We depreciate our vessels based on a straight line basis over the expected useful life of each vessel, which is 25 years from the date of their initial delivery from the shipyard. Depreciation is based on the cost of the vessel less its estimated residual value, which is estimated at $200 per lwt, at the date of the vessel's acquisition. Secondhand vessels are depreciated from the date of their acquisition through their remaining estimated useful life. For the years ended December 31, 2012 and 2011, we recorded vessel depreciation charge of approximately $33.0 million and $50.2 million, respectively. The decrease was primarily due to impairment losses recognized as of December 31, 2011 in connection to our oldest Capesize vessels, which resulted in a reduced net book value for the respective vessels and the sale of Star Ypsilon that took place in March of 2012. An additional reason for reduced depreciation charge is that the net book values of our oldest Capesize vessel Star Sigma and, of the entire fleet of eight Supramax vessels, were further reduced due to impairment losses recognized as of September 30, 2012.

Loss / (gain) on derivative instruments, net: For the year ended December 31, 2012, the gain on derivative instruments was $0.04 million and for the year ended December 31, 2011, the loss on derivative instruments was $0.4 million, in connection with the mark to market valuation of our freight derivatives.

General and administrative expenses: For the years ended December 31, 2012 and 2011, we incurred General and administrative expenses of approximately $9.3 million and $12.5 million, respectively. For the year ended December 31, 2012, our General and administrative expenses consist of salaries and other related costs of the executive officers and other employees ($5.2 million), office renovation costs and rents, legal, accounting costs and consultancy fees, regulatory compliance costs and other miscellaneous expenses ($2.6 million) and costs related to non-vested stock grants under the equity incentive plan ($1.5 million). For the year ended December 31, 2011, our General and administrative expenses consist of salaries and other related costs of the executive officers and other employees ($7.6 million), office renovation costs and rents, legal, accounting costs and consultancy fees, regulatory compliance costs and other miscellaneous expenses ($3.5 million) and costs related to non-vested stock grants under the equity incentive plan ($1.4 million). The decrease is attributed to the cash severance payment of $2.8 million related to the resignation of Company's former Chief Executive Officer and former Chief Financial Officer that took place in 2011 and an amount of $0.3 million related to expenses for an aborted public offering during the second quarter of 2011 that was not completed.

Bad debt expense: For the year ended December 31, 2011, we recognized an aggregate provision for bad debts amounting to $3.1 million, which consists of $1.9 million related to unpaid hire from the charterer of two of our vessels, Star Kappa and Star Epsilon and an amount of $0.5 million related to unpaid hire from the charterer of two of our vessels, Star Gamma and Star Cosmo. In addition, we recognized bad debt expense, amounting to $0.7 million in connection to the settlement, on February 20, 2012, of a commercial claim with the charterer of Star Beta which qualified as an adjusting subsequent event.

Vessel impairment loss: The Company tests for impairment of its long lived assets whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Due to the sustained decline in charter rates and vessel values during the last four years and because market expectations for future rates are low and are unlikely to increase to the high levels of 2008 in the foreseeable future, the Company performed an impairment analysis for all the vessels in its fleet by comparing projected undiscounted cash flows to the carrying values of vessels. As a result of this analysis during the year ended December 31, 2012, we recorded an impairment loss of $303.2 million related to the write down to fair value of the carrying amount of our entire fleet of eight Supramax vessels and of our oldest Capesize vessel Star Sigma. During the year ended December 31, 2011, we recorded an impairment loss of $62.0 million to the book value of the oldest Capesize vessels in our fleet, Star Sigma (built 1991) and Star Ypsilon (built 1991), since the values of these vessels were considered to be non-recoverable.

Gain on time charter agreement termination: During the year ended December 31, 2012:

Star Sigma was time chartered to Pacific Bulk Shipping Ltd. at a gross daily charter rate of $38,000 per day for the period from March 1, 2009 until October 29, 2013, and was redelivered earlier to us on December 31, 2011. On January 4, 2012, we signed an agreement with the charterer in order to receive an amount of $5.734 million in cash, as compensation for the early redelivery of the respective vessel. The total amount was received in January 2012. In addition to the cash payment, Pacific Bulk supplied us with 1,027 metric tons of fuel, valued at $0.720 million.

During the year ended December 31, 2011:

Star Cosmo with a time charter at a gross daily charter rate of $35,615 for the period from February 10, 2009 until May 1, 2011, was redelivered to us early on February 17, 2011. We recognized a gain for this time charter agreement termination of $0.273 million, which relates to the write-off of the unamortized fair value of below market acquired time charter on vessel redelivery date and a gain amounting to $0.324 million, which represents the deferred revenue from the terminated time charter contract.

ii.

Star Omicron was on time charter at a gross daily charter rate of $43,000 per day for the period from April 22, 2008 until February 22, 2011, and was redelivered earlier to the Company on January 17, 2011. We recognized a gain amounting to $1.21 million representing the cash consideration received from its charterers relating to the early termination of this charter party.

iii.

Star Sigma with a time charter at a gross daily charter rate of $38,000 for the period from March 1, 2009 until October 29, 2013, was redelivered to us early on December 31, 2011. We recognized a gain amounting to $0.2 million which represents the deferred revenue from the terminated time charter contract. During the year ended December 31, 2010, we did not record any gain on time charter agreement termination.

Other operational loss: For the year ended December 31, 2012, we recorded a loss of $1.2 million representing the expense incurred by the Company towards a third party, in connection with the settlement of one of the legal cases, that included in the agreement signed in September 2010. Under the specified agreement, we sold to the third party a 45% interest in the future proceeds related to the recovery of certain of the commercial claims against a consideration of $5,000. The expense of $1.2 million was incurred in connection to the settlement amount of $2.5 million described in other operational gain below. During the year ended December 31, 2011, we paid $4.05 million to the third party relating to the settlement of one of the legal claims included in the above mentioned agreement. The expense of $4.05 million was incurred in connection to the settlement amount of $9.0 million described in other operational gain below

Other operational gain: For the year ended December 31, 2012, we recognized a gain of $2.7 million comprising of $2.5 million and $0.2 million regarding the settlement of two commercial claims against Ishhar Overseas, previous charterer of Star Epsilon and Star Kappa and Korea Line Corporation, previous charterer of Star Gamma and Star Cosmo, respectively and a gain of $0.8 million regarding a hull & machinery claim. For the year ended December 31, 2011, we recognized a gain of $9.0 million regarding the settlement in 2011 of a commercial claim against Oldendorff Gmbh & Co. KG of Germany, the former charterer of Star Beta, and a gain of $0.3 million regarding a hull & machinery claim.

Loss on sale of vessel: For the year ended December 31, 2012, we recorded a loss on sale of vessel of $3.2 million related to the sale of Star Ypsilon.

Interest and finance cost: For the year ended December 31, 2012 and 2011, our interest and finance costs under our term loan facilities totaled approximately $7.8 million and $5.2 million, respectively. This increase is mainly due to higher average outstanding debt during 2012 amounting to $241.9 million compared to $214.3 million for 2011, other than the debt used for the financing of our two newbuilding vessels, the interest of which was capitalized until the delivery of the vessels and due to interest capitalized from the general debt in 2011 of $0.8 million.

Interest and other income: For the years ended December 31, 2012 and 2011, interest income was $0.2 million and $0.7 million, respectively.

B.	Liquidity and Capital Resources

Our principal source of funds has been equity provided by our shareholders, long-term borrowing, and operating cash flow. Our principal use of funds has been capital expenditures to establish and grow our fleet, maintain the quality of our drybulk carriers, comply with international shipping standards and environmental laws and regulations, fund working capital requirements, make interest and principal repayments on outstanding loan facilities, and pay dividends.

On July 25, 2013, pursuant to the Rights Offering, approved by our Board of Directors in April 2013, we issued 15,338,861 shares of common stock, which resulted in net proceeds of approximately $77.9 million, after deducting offering expenses of $2.2 million.

On October 7, 2013, we issued and sold 8,050,000 common shares in an underwritten public offering, which resulted in net proceeds of approximately $68.1 million, after deducting offering expenses of $2.7 million.

In November 2013, we entered into agreements to acquire two secondhand Ultramax vessels Star Challenger and Star Fighter for an aggregate purchase price of approximately $58.1 million. The vessels were delivered to us on December 12, 2013 and on December 30, 2013 respectively.

On December 24, 2013 we entered into a binding commitment letter with HSH Nordbank AG for a new senior secured credit facility of up to $35.0 million to be used to partially finance the two Ultramax vessels Star Challenger and Star Fighter which also provide the security for this senior credit facility. The final loan agreement was signed on February 6, 2014 and on February 10, 2014, the total amount of $35.0 million was drawn down.

As of December 31, 2013, we had entered into agreements for the construction of nine drybulk vessels each with fuel specifications, including two 208,000 dwt Newcastlemax drybulk vessels with expected deliveries in January 2016 and April 2016, respectively, one 209,000 dwt Newcastlemax drybulk vessel with expected delivery in March 2016, two 180,000 dwt Capesize drybulk vessels with expected deliveries in October 2015 and January 2016, respectively, two 61,000 dwt Ultramax vessels with expected deliveries in October and November 2015, respectively and two 60,000 dwt Ultramax drybulk vessels with expected deliveries in June and September 2015, respectively. The aggregate purchase price of all nine Newbuilding Vessels is approximately $367.4 million. As of March 20, 2014, we have paid the shipyards approximately $66.8 million, in connection to the construction of the nine Newbuilding Vessels. We aim to seek bank financing for all nine newbuilding vessels.

On January 24, 2014, we entered into agreements to acquire Star Vega and Star Sirius from Glocal Maritime Ltd., an unrelated third party for an aggregate purchase price of $60.0 million. The vessels were delivered to us, on February 13, 2014, and on March 7, 2014, respectively. Upon their delivery, the vessels were chartered back to Glocal Maritime Ltd., for a daily rate of $15,000 less brokerage commission of 1.25% until at least June 2016.

On January 27, 2014, we entered into a binding commitment letter with Deutsche Bank AG for a new senior secured credit facility of up to $39.0 million, to be used to partially finance the Post-Panamax vessels, Star Sirius and Star Vega, which also provide the mortgage collateral for this senior credit facility. On March 14, 2014, the final loan agreement was signed and on March 18, 2014, the total amount of $39.0 million was drawn down.

Our short-term liquidity requirements relate to servicing our debt, paying of operating costs, funding working capital requirements and maintaining cash reserves against fluctuations in operating cash flows and paying cash dividends when permissible. Sources of short-term liquidity include our revenues earned from our charters.

We believe that our current cash balance and our operating cash flows will be sufficient to meet our 2014 liquidity needs, despite that the drybulk charter market has remained at relatively depressed levels throughout 2011, 2012 and 2013 and, despite some improvements, as of the date hereof. Our results of operations have been and may in the future be adversely affected if market conditions do not improve.

Our medium- and long-term liquidity requirements include funding the equity portion of any possible investments in additional vessels and repayment of long-term debt balances. Sources of funding for our medium- and long-term liquidity requirements include new loans we would seek to arrange or equity issuance or vessel sales. As of December 31, 2013, we had outstanding borrowings of $190.3 million of which $18.3 million is scheduled to be repaid in the next twelve months. As of March 20, 2014, we had outstanding borrowings of $259.9 million under our loan facilities, including the drawdown amount of $35.0 million and $39.0 million under our new credit facilities with HSH Nordbank AG and Deutsche Bank AG, respectively.

We may fund possible growth through our cash balances, operating cash flows, additional long-term borrowing and the issuance of new equity. Our practice has been to acquire drybulk carriers using a combination of funds from operations and bank debt secured by mortgages on our drybulk carriers. Our business is capital-intensive and its future success will depend on our ability to maintain a high-quality fleet through the acquisition of newer drybulk carriers and the selective sale of older drybulk carriers. These acquisitions will be principally subject to management's expectation of future market conditions as well as our ability to acquire drybulk carriers on favorable terms.

Cash Flows

As of December 31, 2013, cash and cash equivalents increased to $44.3 million compared to $13.0 million as of December 31, 2012, and the increase in cash and cash equivalents is mainly due to the completion of the Rights Offering in July 2013 which resulted in net proceeds of approximately $77.9 million, after deducting offering expenses of approximately $2.2 million and the sale of 8,050,000 common shares in an underwritten public offering completed in October 2013, which resulted in net proceeds of approximately $68.1 million, after deducting offering expenses of approximately $2.7 million.

Our working capital is equal to current assets minus current liabilities, including the current portion of long-term debt. Our working capital was $24.7 million as of December 31, 2013, compared to a working capital deficit of $4.5 million as of December 31, 2012.

As of December 31, 2013, restricted cash, due to minimum liquidity covenants and cash collateral requirements contained in our loan agreements, decreased to $11.7 million compared to $18.9 million as of December 31, 2012.

Under the amended terms of the supplemental loan agreement with HSH on January 7, 2013, we made a prepayment of $6.596 million, of which $3.5 million was applied against the first tranche of the loan amounting to $48.5 million, the "Supramax Tranche" balloon payment, and $3.096 million was applied pro-rata against the eight quarterly repayment installments of the Supramax Tranche started with the scheduled repayment date in January 2013. We used the pledged amount of $6.504 million, which was held with HSH representing the shortfall between the drawdown amount and the fair value of the collateral vessels on the drawdown date, for the payment amount. Under the amended terms of the loan agreement, we are no longer required to pledge this amount to HSH. In addition, the required minimum liquidity per mortgaged vessel held by HSH was reduced to $0.2 million from $0.4 million, and the released amount of $0.8 million was used as a partial prepayment of the Supramax Tranche: 50% was applied against the balloon payment of the Supramax Tranche and the remaining 50% was applied pro-rata against the eight quarterly repayment installments of the Supramax Tranche, started with the scheduled repayment date in January 2013. For further information please see Item 5. "Operating and Financial Review and Prospects – Senior Secured Credit Facilities". We believe that our current cash balance and our operating cash flow will be sufficient to meet our liquidity needs over the next twelve months.

Year ended December 31, 2013 compared to the year ended December 31, 2012

Net Cash Provided By Operating Activities

Net cash provided by operating activities for the years ended December 31, 2013 and 2012, was $27.5 million and $19.0 million, respectively. Although the average TCE rates decreased for the year ended December 31, 2013, to $14,427 from $15,419 for the year ended December 31, 2012, and the average number of vessels decreased to 13.34 for the year ended December 31, 2013, compared to 14.19 for the year ended December 31, 2012, the increase in cash provided by operating activities was primarily due to the following reasons: (i) increase in management fee income from $0.5 million to $1.6 million; and (ii) positive movement in working capital of $2.2 million compared to a negative movement of $13.5 million for the year ended December 31, 2012. A portion of this increase in working capital was a result of the $6.5 million gain from the time charter agreement termination, which occurred during the year ended December 31, 2012, in connection to early redelivery of Star Sigma by its previous charterer.

Net Cash Used In/ Provided By Investing Activities

Net cash used in investing activities for the year ended December 31, 2013 was $108.1 million. Net cash provided by investing activities for the year ended December 31, 2012 was $25.5 million. For the year ended December 31, 2013, net cash used in investing activities mainly consisted of (i) $127.8 million paid for advances for our Newbuilding Vessels, acquisitions of second hand vessels and other fixed assets, (ii) net proceeds of $8.3 million from sale of Star Sigma, (iii) a net decrease of $7.2 million in restricted cash and (iv) insurance proceeds of $4.3 million. For the year ended December 31, 2012 net cash provided by investing activities mainly consisted of (i) net proceeds of $8.0 million from sale of Star Ypsilon, (ii) a net decrease of $10.6 million in restricted cash, (iii) insurance proceeds of $7.0 million and (iv) payments of $0.1 million relating to additions to office equipment.

Net Cash Provided By/ Used In Financing Activities

Net cash provided by financing activities for the year ended December 31, 2013 was $112.0 million. Net cash used in financing activities for the year ended December 31, 2012 was $46.6 million. For the year ended December 31, 2013, net cash provided by financing activities mainly consisted of (i) proceeds from the rights offering and our underwritten public offering of $150.9 million (ii) less offering expenses of $4.9 million, (iii) loan installment payments of $33.8 million and (iv) payment of financing fees of $0.3 million. For the year ended December 31, 2012, net cash used in financing activities mainly consisted of (i) loan installment payments of $42.0 million, (ii) cash dividend payments of $3.6 million, (iii) payment of financing fees of $0.1 million and (iv) payment of $0.9 million for the repurchase of 61,730 shares under the terms of the share re-purchase plan which expired on December 31, 2012.

Year ended December 31, 2012 compared to the year ended December 31, 2011

Net Cash Provided By Operating Activities

Net cash provided by operating activities for the years ended December 31, 2012, and 2011 was $19.0 million and $50.6 million, respectively. The decrease in cash provided by operating activities was primarily due to a decrease in cash flows generated by the operation of our fleet due to lower average TCE rates as a result of the decline in the drybulk vessel shipping industry despite an increase in the average number of vessels to 14.2 for the year ended December 31, 2012, from 12.3 for the year ended December 31, 2011. During the year ended December 31, 2012, we earned $15,419 TCE rate per day compared to $19,989 TCE rate per day for the year ended December 31, 2011, mainly due to lower charter rates for most of our vessels as imposed by the market. Furthermore, vessel operating expenses increased by approximately 10% for the year ended December 31, 2012, mostly due to operation of a larger fleet. In net cash provided by operating activities for the year ended December 31, 2012, included an amount $2.7 million representing the payment of the installments due up to the date of this report under the settlement agreements of two commercial claims, and the received amount of $6.5 million in connection to early redelivery of Star Sigma by its previous charterer. During the year ended December 31, 2011, (i) we received $9.0 million related to a commercial claim, (ii) we paid $4.05 million to a third party based on the agreement to sell the 45% interest in future proceeds of several commercial claims as stated above; and (iii) we paid a severance to our former Chief Executive Officer and our former Chief Financial Officer of $2.3 million and $0.5 million, respectively.

Net Cash Provided By/Used In Investing Activities

Net cash provided by investing activities for the year ended December 31, 2012, was $25.5 million. Net cash used in investing activities for the year ended December 31, 2011, was $122.3 million. For the year ended December 31, 2012, net cash provided by investing activities mainly consisted of (i) net proceeds of $8.0 million from sale of Star Ypsilon, (ii) a net decrease of $10.6 million in restricted cash, (iii) insurance proceeds of $7.0 million and (iv) payments of $0.1 million relating to additions to office equipment. Net cash used in investing activities for the year ended December 31, 2011, mainly consisted of (i) $29.3 million related to the acquisition of two secondhand Capesize vessels, Star Big and Star Mega, plus cash consideration of $23.1 million paid for the acquisition of the above market time charters attached to Star Big and Star Mega, (ii) $67.0 million related to the acquisition and delivery of two newbuilding vessels, Star Borealis and Star Polaris; and (iii) a net increase of $4.0 million in restricted cash and (iv) insurance proceeds of $1.1 million.

Net Cash Used In/ Provided By Financing Activities

Net cash used in financing activities for the year ended December 31, 2012, was $46.6 million. Net cash provided by financing activities for the year ended December 31, 2011, was $74.0 million. For the year ended December 31, 2012, net cash used in financing activities mainly consisted of (i) loan installment payments of $42.0 million, (ii) cash dividend payments of $3.6 million, (iii) payment of financing fees of $0.1 million, and (iv) payment of $0.9 million for the repurchase of 61,730 shares under the terms of the share re-purchase plan which expired on December 31, 2012. For the year ended December 31, 2011, net cash provided by financing activities mainly consisted of (i) loan installment payments of $101.5 million, (ii) cash dividend payments of $14.4 million, (iii) financing fees of $1.5 million, (iv) loan proceeds of $162.8 million and (v) net proceeds from our underwritten public offering of $28.6 million.

Senior Secured Credit Facilities